<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the
- ---- Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
- ---- Securities Exchange Act of 1934
For the transition period from to
Commission file no.: 0-16285
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
- ----------------------------------------------------------
(Exact name of registrant as specified in its Partnership
Agreement)
MARYLAND 52-1490861
(State of Organization) (IRS Employer Identification Number)
111 South Calvert Street
Baltimore, Maryland 21202
(Address of principal executive offices) (Zip code)
Registrant's phone number, including area code: (410) 539-0000
Securities registered pursuant to Section 12(b) of the Act: none
Securities registered pursuant to Section 12(g) of the Act:
Units of Assignee Limited Partnership Interests
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
Portions of the Registrant's Prospectus dated March 25, 1987
(included in Registration Statement No. 33-11086) are
incorporated by reference into Parts II and III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Mid-Atlantic Centers Limited Partnership (the "Partnership") was
organized as a limited partnership under the Maryland Revised Uniform
Limited Partnership Act on December 16, 1986. The Partnership was
formed to acquire, hold, lease and ultimately sell a portfolio of
community and neighborhood shopping center properties. The General
Partners of the Partnership are FW Realty Limited Partnership, a
limited partnership organized under the Uniform Limited Partnership
Act of the District of Columbia, and Realty Capital IV Limited
Partnership, a limited partnership organized under the Maryland
Revised Uniform Limited Partnership Act (collectively, the "General
Partners").
The Partnership now owns a real estate portfolio of nine shopping
center properties in six states having sold Orchard Square Shopping
Center on December 29, 1995 and Holiday Shopping Center on May 3,
1996. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations of this report for a discussion
of the sale of Orchard Square Shopping Center and Holiday Shopping
Center. The nine remaining shopping centers range in size from
approximately 47,000 leasable square feet to approximately 322,000
leasable square feet, with an aggregate for all shopping centers of
approximately 945,000 leasable square feet as of December 31, 1996.
All of the shopping centers owned by the Partnership were purchased
from unaffiliated sellers. See Item 2. Properties of this report for
a description of each shopping center property. Such descriptions
are incorporated herein by reference.
The General Partners intend to offer the Partnership's properties for
sale as described in Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 13. Certain
Relationships and Related Transactions herein. No definitive plan of
disposition has been adopted by the Partnership to date beyond the
listing of certain properties for sale and, as to Cloister Shopping
Center, the execution of a contract of sale as described herein.
The Partnership's investments in the shopping center properties are
subject to such risks as (i) adverse changes in general economic
conditions and local conditions such as competitive over-building or
decreases in employment or population, (ii) the uncertainty of lease
renewals and possible inability to attract tenants to available
space, (iii) tenant nonperformance of lease obligations, (iv)
uncertainty of cash flow from operations, (v) adverse changes in the
investment climate for real estate, including adverse changes in the
availability of mortgage loans, (vi) adverse changes in zoning, tax
or other local or federal governmental rules or regulations and (vii)
other factors over which the Partnership may have little or no
control and which cannot be predicted.
The Partnership's shopping center properties compete for tenants and
consumer traffic with neighborhood and community shopping centers,
individual retail establishments and shopping malls. The
Partnership's properties have faced increased competition for tenants
among shopping center developers, owners and operators as well as
other retail establishments. Tenants consider many factors
<PAGE> 3
when evaluating potential retail space, including location,
competition, rental rates, tenant fit-up allowances, lease terms,
access, pedestrian and vehicular traffic, parking, quality of
construction, tenant mix within the center and management of the
centers. The Partnership faces the risk that tenants may vacate
space prior to lease expirations or that the Partnership may not be
successful in obtaining renewals of expiring leases or new tenants
for available space. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations of this
report for a discussion of the operations of the shopping centers.
The Partnership does not have any employees. The General Partners or
their affiliates provide, or contract with third parties to provide,
services required for Partnership operation and administration. A
description of the services provided to the Partnership by the
General Partners or their affiliates is incorporated by reference
from Item 13. Certain Relationships and Related Transactions of this
report.
ITEM 2. PROPERTIES
The following discussion should be read in conjunction with Tables I
through IV which follow the discussion below. Table I sets forth the
average annual net rents and range of net rental rates per square
foot for each of the shopping centers. Table II sets forth
information relating to scheduled lease expirations during 1997.
Table III provides information regarding tenants leasing 10% or more
of the space in each shopping center as of December 31, 1996. Table
IV sets forth information relating to estimated real estate taxes
payable in 1997 for each shopping center.
In order to provide certain information required by retirement account
investors, the nine shopping centers owned by the Partnership were
appraised as of December 1, 1996 by an independent MAI appraiser. The
appraisal estimates the current market value "as is" of the leased fee
estate of each property. The December 1, 1996 appraised values of the
shopping centers described in the Restricted Appraisal Report filed as
an exhibit to this report are based upon the income capitalization
approach to valuation. The Restricted Appraisal Report is the result
of a limited appraisal process and is subject to the limiting
conditions and assumptions stated therein.
An appraisal is only an estimate of current value and should not be
relied upon as a reflection of realizable value. The value of real
estate is typically driven by rent, occupancy, expense and yield
expectations, measured in the form of capitalization rates.
Capitalization rates depend on anticipated growth or decline in
income and the degree of risk perceived. The income capitalization
approach is a procedure which converts anticipated income to be
derived from the Partnership's ownership in the shopping centers into
a value estimate. In estimating the appraised value of the shopping
centers under the income approach, projections of a stabilized level
of net operating income (earnings before depreciation, interest and
income taxes) were developed by the appraiser. The projected net
operating income was then capitalized into an estimate of fair value
utilizing overall rates of return selected by the appraiser. The
appraiser also utilized a discounted cash flow analysis whereby the
anticipated cash flows were discounted at a yield rate selected by
the appraiser to determine estimated present value. The overall
rates of return and yield rates used in such calculations are
determined by the appraiser based on rates derived from selected
current sales of comparable properties as well as investor surveys,
<PAGE> 4
and are therefore deemed by the appraiser to be reflective of current
investor expectations. The appraised value of the Partnership's
shopping centers should not be relied upon as an indication of
realizable value at the present time or at any time in the future.
The appraisals reflect value to the owner, and therefore do not make
allowance for expenses that would be incurred in selling the
properties. Furthermore, the methods and assumptions used by the
appraiser in preparing the appraisal report are those that the
appraiser, in its professional judgment, concluded were appropriate.
There is no assurance that such assumptions will materialize or that
other or different methods or assumptions that would result in lower
values might be appropriate.
The following table sets forth the appraised value (free and clear of
all mortgages or other financing secured by the shopping centers) of
each shopping center owned by the Partnership as of December 1, 1996
and December 31, 1995:
APPRAISED VALUE
PROPERTY 12/01/96 12/31/95
Woodlawn Village $ 2,375,000 $ 2,375,000
Lynnwood Place 6,450,000 6,950,000
Highlandtown Village 4,550,000 5,000,000
Jackson Heights 4,800,000 4,700,000
Holiday (1) - 1,200,000
Cloister 2,550,000 2,700,000
Edgewood 2,150,000 2,470,000
Tarrytown Mall 4,500,000 6,100,000
Berkeley Square 3,000,000 3,075,000
Quality Center 3,950,000 4,500,000
Total $34,325,000 $39,070,000
(1) - Holiday was sold in May 1996.
The resulting aggregate appraised value of the Partnership's shopping
centers as of December 1, 1996, less the Partnership's mortgages and
after certain other adjustments resulted in a valuation of the
Partnership's net assets at approximately $12,223,000. Based on
1,200,000 Assignee Limited Partnership Units (the "Units")
outstanding, this equates to approximately $10.19 per Unit. The net
asset value of the Partnership does not account for selling expenses.
The aggregate appraised value of the Partnership's shopping centers
as of December 31, 1995, less the Partnership's mortgages and other
adjustments resulted in a valuation of the Partnership's net assets
at approximately $13,052,000. Based on 1,200,000 Units outstanding,
this equated to approximately $10.88 per Unit.
The 6% per Unit decrease in net asset value from December 31, 1995 to
December 31, 1996 was primarily attributable to declines in the
appraised values of Quality Center, Lynnwood Place and Highlandtown
Village. The decline in the value of Quality Center reflects a
decline in the projected net operating income from that center. The
decline in the value of Lynnwood Place reflects an increase in the
capitalization rate and a decline in the projected net operating
income for that center. The decline in the value of Highlandtown
Village reflects an increase in the capitalization rate for that
center. Highlandtown Village has encountered increased competition
from a newly constructed free-
<PAGE> 5
standing grocery store, Safeway, in its market area. The negative
effects of these declines in values were offset in part by a decline
in the Partnership's long-term debt and an increase in the
Partnership's cash and cash equivalents. For 1996 and 1995, the
Partnership's net equity in assets related to Tarrytown Mall was
treated as zero, reflecting the inability to lease the vacant space
at that center. For purposes of the per Unit calculation for 1996
and 1995, the value of the sum of all assets related to Tarrytown
Mall is equal to the balance of the outstanding mortgage debt and
accrued interest on the property. The mortgage debt is nonrecourse
to the Partnership.
In the fourth quarter of 1996, the Partnership recorded an impairment
charge of $2,895,000 to write-down the carrying value of Tarrytown
Mall to its fair value of $4,500,000 as of December 1, 1996. In the
fourth quarter of 1995, the Partnership wrote down assets related to
Tarrytown Mall by $2,606,156. In the fourth quarter of 1994, the
Partnership wrote down assets related to Tarrytown Mall and Holiday
totalling $1,587,746. See the discussions under the caption
Liquidity and Capital Resources incorporated by reference from Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations and under Note H of Notes to Financial
Statements incorporated by reference from Item 8. Financial
Statements and Supplementary Data herein.
The Partnership sold Orchard Square shopping center on December 29,
1995 and Holiday shopping center on May 3, 1996. The General
Partners continue to seek opportunities to sell Partnership
properties. See Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Item 13. Certain
Relationships and Related Transactions herein regarding the
Partnership's activities in this regard.
Depreciation of the shopping centers is computed using the straight-
line method based on the estimated useful lives of the respective
assets. The General Partners believe the shopping centers are
adequately insured.
The Partnership's shopping center portfolio, representing nine
centers with approximately 945,000 leasable square feet, was
approximately 84% leased as of December 31, 1996. As of December 31,
1995, the portfolio, which represented ten centers with approximately
1,034,000 leasable square feet, was approximately 84% leased.
WOODLAWN VILLAGE SHOPPING CENTER
In December 1986, the Partnership purchased Woodlawn Village Shopping
Center ("Woodlawn Village"), a 49,800 leasable square-foot shopping
center anchored by a Food Lion grocery store and a Revco drugstore.
Woodlawn Village is located in Fredericksburg, Virginia. Woodlawn
Village was approximately 93% leased as of December 31, 1996 and
1995.
In January 1995, the Partnership executed a lease modification with
Food Lion at Woodlawn Village for an expansion of its store from
25,000 to 32,744 square feet. The expansion, which was substantially
complete in February 1997, added 4,444 square feet to the center and
converted 3,300 square feet of in-line space to Food Lion use. A
discussion of the Food Lion expansion is incorporated by reference
from Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations herein.
<PAGE> 6
LYNNWOOD PLACE SHOPPING CENTER
In July 1987, the Partnership purchased Lynnwood Place Shopping
Center ("Lynnwood Place"), a 96,666 leasable square-foot shopping
center anchored by a Kroger grocery store. Lynnwood Place is located
in Jackson, Tennessee. As of December 31, 1996, Lynnwood Place was
approximately 95% leased, a decrease from approximately 98% as of
December 31, 1995.
HIGHLANDTOWN VILLAGE SHOPPING CENTER
In September 1987, the Partnership purchased Highlandtown Village
Shopping Center ("Highlandtown Village"), a 56,200 leasable square-
foot shopping center anchored by a Santoni's grocery store and a
Rite-Aid drugstore. Highlandtown Village is located in Baltimore,
Maryland. Highlandtown Village was 100% leased as of December 31,
1996 and 1995.
JACKSON HEIGHTS PLAZA SHOPPING CENTER
In September 1987, the Partnership purchased Jackson Heights Plaza
Shopping Center ("Jackson Heights"), a 155,878 leasable square-foot
shopping center. The larger tenants at Jackson Heights include a
health spa, a Carmike Theater, Badcock Furniture, Goodyear and Dollar
General. Jackson Heights is located in Murfreesboro, Tennessee. As
of December 31, 1996, Jackson Heights was 100% leased, an increase
from 99% leased as of December 31, 1995.
On October 7, 1996, the Partnership sold a parcel of excess land of
approximately 4,400 square feet at Jackson Heights to an unrelated
third party for $40,000. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations herein for
information regarding that transaction.
CLOISTER SHOPPING CENTER
In December 1987, the Partnership purchased Cloister Shopping Center
("Cloister"), a 53,610 leasable square-foot shopping center anchored
by a Rite-Aid drugstore and a Family Dollar discount store.
Cloister is located in Ephrata, Pennsylvania. As of December 31,
1996, Cloister was approximately 95% leased, an increase from 90% as
of December 31, 1995.
EDGEWOOD PLAZA SHOPPING CENTER
In April 1988, the Partnership purchased Edgewood Plaza Shopping
Center ("Edgewood") a 47,112 leasable square-foot shopping center
anchored by a Santoni's grocery store and a Rite-Aid drugstore.
Edgewood is located in Harford County, Maryland. Edgewood was 100%
leased as of December 31, 1996 and 1995.
In 1996, Rite-Aid, a tenant leasing 6,400 square feet, acquired
property and constructed a free-standing retail store directly across
Route 755 from Edgewood Plaza. The free-standing Rite-Aid opened in
October 1996 and Rite-Aid at Edgewood closed its store at that time.
See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations herein for information regarding
Rite-Aid's lease obligation.
In September 1995, the Partnership obtained a loan in the amount of
$1,400,000 secured by a mortgage on Edgewood. Approximately $452,000
was placed in escrow for a capital improvement
<PAGE> 7
plan at Edgewood which was substantially complete in July 1996. The
improvements included a new facade, roof and parking lot resurfacing.
A description of the Edgewood Plaza improvements and financing are
incorporated by reference from Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
On September 25, 1996, the Partnership sold a pad site at Edgewood
Plaza to an unrelated third party for approximately $220,000. On
December 5, 1996, the Partnership sold a parcel of excess land of
approximately .83 acres at this center to an unrelated third party
for a price of $29,900. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations herein for
information regarding these transactions.
TARRYTOWN MALL SHOPPING CENTER
In September 1988, the Partnership purchased Tarrytown Mall Shopping
Center ("Tarrytown Mall"), a 322,081 leasable square-foot enclosed
mall anchored by Montgomery Ward and Goody's Family Clothing.
Tarrytown Mall is located in Rocky Mount, North Carolina. As of
December 31, 1996, Tarrytown Mall was approximately 61% leased, a
decrease from approximately 64% as of December 31, 1995.
On August 6, 1996, the Partnership sold a pad site of approximately
1.15 acres of land at Tarrytown Mall to an unrelated third party for
a price of $330,000. See Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations herein for
information regarding the sale of the pad site.
BERKELEY SQUARE SHOPPING CENTER
In October 1988, the Partnership purchased Berkeley Square Shopping
Center ("Berkeley Square"), a 101,858 leasable square-foot shopping
center. The larger tenants at Berkeley Square include Dollar
General, Advanced Auto, Educational Wonderland and a bingo emporium.
Berkeley Square is located in Goose Creek, South Carolina. As of
December 31, 1996, Berkeley Square was approximately 97% leased, an
increase from approximately 95% as of December 31, 1995.
In November 1995, the Partnership completed the sale of a pad site at
Berkeley Square to an existing tenant. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations of this report for information regarding the sale of the
pad site.
QUALITY CENTER SHOPPING CENTER
In January 1989, the Partnership purchased Quality Center Shopping
Center ("Quality Center"), a 62,234 leasable square-foot shopping
center. The largest tenant at Quality Center is a Mikasa china
outlet. Quality Center is located in Lancaster, Pennsylvania.
Quality Center was approximately 73% leased as of December 31, 1996,
an increase from approximately 70% as of December 31, 1995.
The Partnership continues its attempt to reposition Quality Center
from a factory outlet center to a neighborhood and community
convenience center.
<PAGE> 8
The following shopping centers have been sold by the Partnership:
HOLIDAY SHOPPING CENTER
In October 1987, the Partnership purchased Holiday Shopping Center
("Holiday"), an 82,185 leasable square-foot shopping center anchored
by a Family Dollar discount store. Holiday is located in
Collinsville, Virginia. On May 3, 1996, the Partnership sold Holiday
to an unrelated third party for $1,200,000. See Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations of this report for information regarding the
sale of Holiday.
ORCHARD SQUARE SHOPPING CENTER
In December 1987, the Partnership purchased Orchard Square
Shopping Center ("Orchard Square"), an 85,940 leasable square-
foot shopping center. Orchard Square is located in Cobb County,
Georgia. On December 29, 1995, the Partnership sold Orchard
Square to an unrelated third party for $5,250,000. See Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations of this report for information regarding
the sale of Orchard Square.
<PAGE> 9
TABLE I. AVERAGE ANNUAL NET RENTS AND RANGE OF NET RENTAL RATES
PER SQUARE FOOT
AVERAGE ANNUAL RANGE OF
NET RENT (1) NET RENTAL RATES(2)
CENTER (PER SQUARE FOOT) (PER SQUARE FOOT)
Woodlawn Village $6.36 $5.88 to $9.96
Lynnwood Place 8.64 6.94 to 15.49
Highlandtown Village 10.50 7.85 to 20.42
Jackson Heights 4.67 .80 to 11.11
Cloister 8.06 3.77 to 12.84
Edgewood 6.60 4.90 to 15.16
Tarrytown Mall 4.51 1.96 to 21.92
Berkeley Square 4.96 3.04 to 11.16
Quality Center 12.43 9.00 to 18.23
(1) Average annual net rent is calculated based on the
shopping center's aggregate annual net rent (prior
to assessments for pass-throughs) for leases in place as
of December 31, 1996 divided by the total leased square
feet for the shopping center as of that date.
(2) For purposes of this table net rental rates do not
include net rental rates for kiosks.
TABLE II. SCHEDULE OF LEASES EXPIRING IN 1997 BY SHOPPING CENTER
<TABLE>
<CAPTION>
NUMBER OF SQUARE FEET ANNUAL RENT
TOTAL SQUARE TENANTS WITH OF LEASES 1996 TOTAL OF LEASES
FOOTAGE LEASES EXPIRING AS A RENT OF EXPIRING AS A
CENTER OF CENTER EXPIRING(1) % OF TOTAL(1) CENTER(2) % OF TOTAL(1)
<S> <C> <C> <C> <C> <C>
Woodlawn 49,800 3 12.05% $284,257 13.60%
Lynnwood 96,666 9 20.42 821,998 26.98
Highlandtown 56,200 2 4.46 584,512 7.81
Jackson Heights 155,878 12 21.08 701,834 21.29
Cloister 53,610 3 9.10 384,419 10.89
Edgewood Plaza 47,112 1 5.35 293,872 6.30
Tarrytown Mall 322,081 17 10.16 877,052 21.98
Berkeley Square 101,858 9 15.41 495,009 20.20
Quality Center 62,234 4 24.16 587,436 38.97
</TABLE>
(1) This table has been adjusted for lease renewals which were
executed in the first quarter of 1997.
(2) Total rent for purposes of this table does not include
tenant reimbursement income or rental income accrued for
rent adjustments related to rent abatements and scheduled
rent increases.
<PAGE> 10
TABLE III. SCHEDULE OF TENANTS LEASING 10% OR MORE OF THE SPACE
IN EACH SHOPPING CENTER AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE OF ANNUAL
TOTAL LEASABLE RENT PER LEASE LEASE
SQUARE SPACE AS OF SQUARE EXPIRATION RENEWAL
FEET 12/31/96 FOOT DATE OPTIONS
<S> <C> <C> <C> <C> <C>
WOODLAWN VILLAGE
Food Lion-grocery store 25,000 50% $5.75 June 2006 4 5-year (1)
Revco-pharmacy/drugstore 9,100 18% 6.75 June 2001 4 5-year (2)
LYNNWOOD PLACE
Kroger-grocery store 49,296 51% 6.94 August 2006 6 5-year (2)
HIGHLANDTOWN VILLAGE
Santoni's-grocery store 25,500 45% 7.85 July 2007 4 5-year (1)
Rite-Aid-pharmacy/drugstore 11,200 20% 10.15 July 2007 4 5-year (1)
JACKSON HEIGHTS
Southeast Spa-health spa 20,487 13% 2.66 March 2004 none
Badcock Furniture-furniture 16,534 11% 3.25 February 1999 2 5-year (1)
Carmike Theater - movie theater 17,110 11% 2.87(3) May 2015 none
CLOISTER
Family Dollar-discount store 6,890 13% 3.77 December 2000 3 5-year (1)
Blockbuster-video rental store 6,330 12% 7.50 September 2002 none
EDGEWOOD
Santoni's-grocery store 23,832 51% 4.90 February 2008 none
Rite Aid-pharmacy/drugstore (4) 6,400 14% 6.50 July 1999 4 5-yr(1)(4)
TARRYTOWN MALL
Montgomery Ward-department store 74,069 23% 1.96 October 2003 3 5-year (2)
BERKELEY SQUARE
Toney & Coates Bingo
-entertainment 13,558 13% 5.75 June 1998 none
QUALITY CENTER
Mikasa-china and crystal outlet 11,120 18% 10.81 July 1997 1 5-year (1)
Oriental Rugs - rug outlet 6,715 11% 10.00 November 1998 1 3-year and
1 4-year (1)
</TABLE>
(1) Renewal options with rent at escalating rates per square
foot.
(2) Renewal options with rent at identical rate per square foot
as original lease.
(3) Carmike Theater leases two spaces at different annual rents.
The annual rent per square foot for purposes of this schedule
is an average of the two annual rents.
(4) Rite-Aid constructed a free-standing store directly across
the street from Edgewood Plaza and closed its store at that
shopping center in October 1996. The Partnership is
currently negotiating a lease termination agreement with
Rite-Aid.
<PAGE> 11
TABLE IV. SCHEDULE OF ESTIMATED REAL ESTATE TAXES PAYABLE IN
1997
Woodlawn Village $ 41,500
Lynnwood Place 82,500
Highlandtown Village 123,700
Jackson Heights 100,100
Cloister 62,200
Edgewood 17,000
Tarrytown Mall 70,700
Berkeley Square 41,900
Quality Center 63,000
$602,600
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not party to any material pending legal
proceeding. The Partnership is party to ordinary routine
litigation incidental to the Partnership's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of investors (the "Limited
Partners") holding Units during 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF ASSIGNEE LIMITED
PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS
There is no trading market for the Units and there is no present
expectation that one will develop. Consequently, Limited
Partners may not be able to liquidate their investment. Further,
the transfer of Units is subject to certain limitations. See
Page 66 of the Partnership's Prospectus dated March 25, 1987
incorporated by reference herein, for a discussion of the
restrictions on transfer of the Units. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Item 13. Certain Relationships and Related
Transactions herein regarding the General Partners' intention to
sell the Partnership's assets.
As of December 31, 1996, there were approximately 2,700 holders
of 1,200,000 Units of the Partnership.
One of the objectives of the Partnership is to generate cash to
be distributed to Limited Partners. No cash distributions have
been made to Limited Partners since 1990. A discussion of cash
flow is incorporated by reference from Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations herein. See Pages 59 through 62 of the Partnership's
Prospectus dated March 25, 1987 incorporated by reference herein,
for a discussion of the manner in which distributions of cash
flow, sale, or refinancing proceeds and allocations of the net
income
<PAGE> 12
or net loss from operations and gain or loss from a sale or
refinancing are to be made by the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial information
relating to the Partnership's financial position and operating
results. This information should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Financial Statements and
Supplementary Data which are included in ITEMS 7 and 8,
respectively, herein.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating Results: (1)
Total income $6,476,674 $7,426,069 $7,907,735 $7,013,668 $6,907,149
Loss from rental operations (3,500,781) (3,313,097) (1,727,918) (724,098) (1,191,145)
Loss from sale of center (78,687) (2,271,249) - - -
Extraordinary gain related to
forgiveness of debt - 1,602,902 - - 510,465
Net loss (3,225,468) (3,778,465) (1,717,157) (691,862) (719,768)
Financial Position, End of Year: (1)
Investment in real estate
held for lease, net 34,384,021 39,787,906 50,532,803 53,530,821 53,064,528
Total assets 39,667,115 43,564,545 53,218,234 55,764,988 55,535,253
Long-term debt, including
current maturities 28,104,113 29,130,611 35,285,891 34,528,736 35,004,686
Per Assignee Limited
Partnership Unit:
Net loss (1) (2.71) (3.57) (1.42) (0.57) (0.59)
Cash distributions - - - - -
</TABLE>
(1) - The 1996, 1995 and 1994 operating results and the financial position as
of December 31, 1996, 1995 and 1994 reflect the effect of write-downs of
assets totalling $2,895,000 in 1996 and $2,606,156 in 1995 related to
Tarrytown Mall and $1,587,746 in 1994 related to Tarrytown Mall and
Holiday. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations herein for a discussion of the
write-downs of assets.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Partnership completed its public offering of Units on
November 11, 1987. The Partnership accepted subscriptions for
1,200,000 Units, representing capital contributions from Limited
Partners of approximately $29,997,000. The capital contributions
from Limited Partners have been fully invested by the
Partnership.
The Partnership's financial statements are prepared based on the
accrual method of accounting. The Partnership's rental income
from its shopping center properties consists of base rents from
tenants occupying space in each shopping center. In addition,
certain leases provide for additional rent computed based on a
percentage of gross sales in excess of specified levels. In some
cases, leases provide for rent abatements and scheduled rent
increases over the life of the lease. To the extent a
<PAGE> 13
lease provides for rent abatements or adjustments, the
Partnership, in accordance with generally accepted accounting
principles, recognizes rental income on the basis of equal
monthly payments over the term of such lease. Market conditions
have dictated offering a wide variety of concessions to
prospective tenants, which most frequently include a combination
of free rent and reduced rental rate.
The Partnership wrote off tenant rent receivables and charged the
allowance for doubtful accounts in 1994, 1995 and 1996 in the
amounts of $261,363, $198,993, and $171,281, respectively.
During the year ended December 31, 1995, the Partnership
decreased its year-end allowance for doubtful accounts by $26,834
to $326,673. During the year ended December 31, 1996, the
Partnership decreased its year-end allowance for doubtful
accounts by $97,682 to $228,991. The allowance for doubtful
accounts represents an allowance for tenant rent receivables that
may become uncollectible in the future. The Partnership makes
adjustments quarterly to the allowance for doubtful accounts
based on its analysis of tenant rent receivables.
As of December 31, 1996, tenant rent receivables prior to the
allowance for doubtful accounts totaled $996,214 of which
$317,688 represented receivables required to be accrued in
accordance with applicable accounting principles to reflect
scheduled rent increases over the terms of the applicable leases
and $678,526 represented the balance. As of December 31, 1995,
comparative tenant rent receivables totaled $1,117,704 of which
$313,259 represented receivables required to be accrued and
$804,445 represented the balance. The decline in tenant rent
receivables from December 31, 1995 to December 31, 1996 can
primarily be attributed to the sale of Orchard Square and
Holiday.
Tenant reimbursement income includes payments made by tenants
under leases representing payment of a tenant's agreed share of
real estate taxes, insurance, utility charges and common area
maintenance expenses. With the exception of Berkeley Square and
Jackson Heights, a majority of the tenant leases at the
Partnership's shopping centers provide for reimbursement by
tenants for some or all such expenses. In most cases, tenant
reimbursement payments are payable monthly, although in some
cases such payments are to be made annually.
Other expenses include the balance of utility expenses, leasing
expenses (other than commissions) and miscellaneous expenses such
as legal and accounting fees and administrative and travel
expenses.
<PAGE> 14
The Partnership's shopping centers are held subject to mortgages
with principal balances as of December 31, 1994, 1995 and 1996 as
described in the following chart:
MORTGAGE LOANS SECURED BY SHOPPING CENTERS
<TABLE>
<CAPTION>
DESCRIPTION OF FACE
SHOPPING CENTER INTEREST MATURITY AMOUNT OF BALANCE BALANCE BALANCE
MORTGAGES RATE DATE MORTGAGES 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
First mortgage
on Woodlawn Village 8.5% 12/01/06 $1,950,000 $1,852,380 $1,832,675 $1,810,780
First mortgage
on Lynnwood Place 9.5% 2/10/00 6,600,000 6,396,988 6,320,814 6,220,016
First mortgage
on Highlandtown 10.125% 12/21/97 3,275,000 3,213,952 3,177,097 3,136,332
First mortgage
on Jackson Heights 10.5% 9/12/98 2,450,000 2,088,413 2,051,068 1,974,849
First mortgage
on Holiday - - 900,000 328,015 257,922 -
First mortgage 9.75% at
on Cloister 12/31/96(1) 6/01/98 1,750,000 1,545,237 1,494,717 1,444,197
First priority mortgage
on Orchard Square - - 6,000,000 5,832,229 - -
First priority mortgage
on Berkeley Square 10.13% 12/31/97 1,975,000 1,826,762 1,454,215 1,385,065
Second priority mortgage
on Berkeley Square - - 695,500 695,500 - -
First trust mortgage 10.0% at
on Tarrytown 12/31/96(2) 1/01/99 2,640,940 2,266,940 1,923,940 1,674,940
Second trust mortgage
on Tarrytown Mall 8.0% 1/01/99 6,500,000 5,384,997 5,384,997 5,384,997
First mortgage
on Edgewood Plaza 8.625% 9/01/00 1,400,000 - 1,397,333 1,380,501
First mortgage 2/01/98
on Quality Center 10.625% (3) 4,150,000 3,854,478 3,835,833 3,692,436
Totals $40,286,440 $35,285,891 $29,130,611 $28,104,113
</TABLE>
(1) - Interest rate at the prime rate plus 1.25%, with a floor of 7.25%.
(2) - Interest rate at the prime rate plus 1.50%, with a floor of 7.5%.
(3) - The Quality Center loan was scheduled to mature on February 1, 1997.
The lender has agreed to extend the term of the loan for one year
subject to completion of the required documentation.
The mortgage loans are generally without recourse to the assets
of the Partnership other than the particular property (and
related receivables, leases, personal property and certain
escrows) securing such mortgage loans. The mortgages are not
cross-collaterized.
<PAGE> 15
The Woodlawn Village mortgage, which had an outstanding principal
balance of $1,810,780 at December 31, 1996, matured December 1,
1996. In October 1996, the Partnership applied to extend the
full principal balance of the loan for a 10 year term at an
interest rate of 8.5%. The mortgage extension was completed in
March 1997. Level payments of approximately $189,000 annually
based on a 20 year principal amortization were effective January
1, 1997. The extended mortgage is designed to be assumable by a
buyer of the property. To obtain this extension, the Partnership
paid the lender a fee of approximately $18,000.
The Lynnwood Place mortgage, which had an outstanding principal
balance of $6,220,016 at December 31, 1996, was scheduled to
mature on July 10, 1996. The lender extended the term of this
loan to December 31, 1996 on the same terms and conditions
previously existing under the loan. On January 29, 1997, the
lender renewed the mortgage for three years to February 10, 2000.
The Lynnwood Place mortgage has an interest rate of 9.5% and
requires level payments of approximately $652,000 annually based
on a 21 year principal amortization. The renewed mortgage is
prepayable without penalty in the event of sale of the center.
To obtain the mortgage extension on the terms described, the
Partnership paid the lender $300,000 in reduction of the
principal balance of this loan and a fee of approximately
$59,000. The Partnership incurred additional legal and closing
fees totalling approximately $70,000.
Tarrytown Mall's first trust mortgage required principal payments
of $19,000 per month until June 30, 1996, when required principal
payments were scheduled to increase to $44,000 per month. The
first trust lender agreed to reduce the required payment schedule
of principal payments to $22,500 per month effective July 1, 1996
until June 30, 1997 or such earlier date as a replacement tenant
is found for the Wholesale Depot space. All other loan terms
remain unchanged. Monthly principal payments are scheduled to
increase to $49,000 on July 1, 1997 and to $54,000 on February 1,
1998. Net cash flow from operations at Tarrytown Mall currently
would be insufficient to meet the July 1997 scheduled increase in
the monthly principal payments under the first trust mortgage.
The second trust mortgage requires that after payment of first
trust debt service and capital improvements made with respect to
Tarrytown Mall, net cash flow from operations from that center be
applied to second trust mortgage interest and principal
curtailments. To the extent that net cash flow is insufficient
to make second trust debt service payments, unpaid interest on
the second trust loan is accrued rather than paid. The
Partnership accrued approximately $431,000 in unpaid interest in
1996. Accrued and unpaid interest bears interest at 8% per annum
and is due at the maturity of the loan or earlier to the extent
net cash flow is available.
The Quality Center mortgage, which had an outstanding principal
balance of $3,692,436 at December 31, 1996, was scheduled to
mature on February 1, 1997. The lender has agreed to extend the
term of this loan for one year to February 1, 1998 on the same
terms and conditions as currently exist, subject to completion of
the required documentation.
Approximately $5,527,000 of the Partnership's mortgage debt
matures during 1997. This debt relates to the mortgages on
Highlandtown Village and Berkeley Square. The Highlandtown
Village mortgage, which had an outstanding principal balance of
$3,136,332 at December 31, 1996, matures
<PAGE> 16
on December 21, 1997. The Partnership currently anticipates that
the Partnership will refinance the Highlandtown Village mortgage
at maturity. The Berkeley Square mortgage, which had an
outstanding principal balance of $1,385,065 at December 31, 1996,
matures on December 31, 1997. The Partnership currently
anticipates that the Partnership will exercise its option to
extend the Berkeley Square mortgage to December 1998. If the
Partnership is unable to extend these loans or refinance on
acceptable terms, the Partnership may be required to seek
additional borrowing, sell one or more of its shopping center
properties, or default on its obligations.
CASH FLOW
The Partnership recorded a $1,386,227 net increase in cash and
cash equivalents in 1996, with $1,149,435 in net cash provided by
operating activities and $1,567,189 provided by investing
activities, partially offset by $1,330,397 used in financing
activities. The increase in cash and cash equivalents is
primarily attributable to the sale of Holiday, the sale of a pad
site and land parcel at Edgewood Plaza and the release of a
mortgage escrow deposit to the Partnership related to Edgewood
Plaza. The sale of Holiday on May 3, 1996 contributed
approximately $858,000 to the increase in cash and cash
equivalents after payment of mortgage debt and transaction
expenses related to the sale. The sales of a pad site and land
parcel at Edgewood Plaza contributed approximately $238,000 after
payment of sale expenses. The release of an escrow for
completion of the environmental remediation at Edgewood Plaza
contributed $130,000. The net proceeds from the sale of a pad
site at Tarrytown Mall of $324,394 did not increase cash and cash
equivalents since the proceeds were placed in escrow with the
first trust lender. The net proceeds of approximately $35,000
from the sale of a parcel of land at Jackson Heights did not
increase cash and cash equivalents since the proceeds were
applied to reduce the mortgage on that center.
The principal differences between the net loss of $3,225,468 and
net cash provided by operating activities of $1,149,435 were the
non-cash charge of $1,494,716 for depreciation and amortization,
a write-down of assets of $2,895,000 and an increase in accrued
interest payable of $415,069. See the discussions of the write-
down of assets related to Tarrytown Mall, the sale of Holiday and
the sales of pad sites or land parcels at Edgewood Plaza,
Tarrytown Mall and Jackson Heights incorporated by reference from
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital
Resources herein.
In connection with investing activities, in addition to $108,447
expended for improvements of real estate, the Partnership
expended $278,972 from a capital improvement escrow related to
Edgewood Plaza during 1996. Net cash used in financing
activities of $1,330,397 primarily resulted from monthly
principal payments on long-term debt totalling $643,988, the
retirement of debt related to Holiday of $232,726, the payment of
$115,025 to reduce the principal balance of the Quality Center
mortgage in connection with a loan extension, and the
establishment of a mortgage escrow deposit of $324,394 from
proceeds of the pad site sale at Tarrytown Mall. Principal
payments on long-term debt included $249,000 with respect to the
Tarrytown Mall first trust loan. For purposes of the statement
of cash flows, the net use of cash for mortgage escrow deposits
of $194,394 represented the establishment of the mortgage escrow
deposit at Tarrytown Mall of $324,394, net of the release of the
$130,000 escrow for completion of the environmental remediation
work at Edgewood Plaza.
<PAGE> 17
LIQUIDITY AND CAPTIAL RESOURCES
At the conclusion of its public offering, the Partnership
established a working capital reserve of 3% of the net proceeds
of the offering, or $900,000, an amount that was expected to be
sufficient to satisfy general liquidity requirements. The
working capital reserve was utilized to fund the build-up of the
tenant rent receivables and to pay for renovation and
construction expenses at various shopping centers and other
expenses.
In the past, liquidity has been adversely affected by lower than
anticipated rental income and higher than anticipated tenant
rents receivable. The cash and cash equivalents position of the
Partnership at December 31, 1996 increased approximately
$1,386,000 from that at December 31, 1995, with approximately
$1,096,000 of that increase resulting from the sales of Holiday
and a pad site and land parcel at Edgewood Plaza. The
Partnership's cash and cash equivalents position fluctuates from
quarter to quarter as follows: (i) decreasing with the funding
of lease-up costs and tenant improvements; (ii) decreasing with
the funding of renovation and expansion costs of the shopping
centers; (iii) increasing as borrowing proceeds, sale proceeds,
net rental income and interest income are received; (iv)
decreasing as expenses (including debt service requirements) are
paid; and (v) decreasing by any payment of Partnership
distributions.
As of December 31, 1996, cumulative cash distributions of
$6,647,888 and $62,391 had been made to Limited Partners and the
General Partners, respectively. These cash distributions
represented a 7% annualized return for each calendar quarter
through and including the quarter ended June 30, 1990. The
distribution for the quarter ended September 30, 1990 represented
a 5.8% annualized return. The cumulative distributions for 1990
represented a 5% annualized return to Limited Partners. No
distributions have been made to Limited Partners since the
distribution for the quarter ended September 30, 1990.
Under the Cash Flow Protector, the General Partners agreed to
loan to the Partnership, without interest, up to a maximum amount
equal to 50% of the acquisition fees actually paid to them at the
time the loan was made in the event the annual cumulative non-
compounded return to Limited Partners fell below 7% of the
allocable invested capital for the period from February 1, 1989
through January 31, 1992. In 1990, the General Partners
fulfilled their obligation under the Cash Flow Protector
provisions. As of December 31, 1996, Cash Flow Protector loans
totalling $789,203 are payable to FW Realty Limited Partnership
in the amount of $599,794 and to Realty Capital IV Limited
Partnership in the amount of $189,409. The loans are non-
interest bearing and are to be repaid from distributable cash
flow or sale or refinancing proceeds only after the payment of a
preferred return equal to a 10% annual cumulative non-compounded
return on invested capital to Limited Partners.
The ability of the Partnership to distribute cash flow cannot be
predicted, as it depends upon future events, such as the
profitability of future operations, requirements for cash
expenditures to attract and retain tenants, and the requirements
of lenders as mortgages become payable and loans are extended,
modified and refinanced. It has been the policy of the
Partnership to apply any increase in cash to increase Partnership
working capital reserves, to provide for shopping center
<PAGE> 18
improvements if and when necessary, and to repay and refinance
debt as required. That policy reflects the General Partners'
belief that maintenance of adequate cash reserves is prudent in
view of the current real estate and general economic environments
and is consistent with the Partnership's objective to maintain
and increase the value of its shopping centers. Consequently,
there has been no assurance as to the availability of cash flow
to make distributions to partners. However, in light of the
consummation of the sales of Orchard Square and Holiday, the
extensions of the Lynnwood Place and Woodlawn mortgages and other
developments, the General Partners anticipate that the
Partnership will make a cash distribution to Unitholders in the
amount of $2 per Unit payable upon the close of the sale of
Cloister Shopping Center in the second quarter of 1997. In the
event such sale does not occur, the distribution will be $1 per
Unit. The Partnership's Statements of Cash Flows is incorporated
by reference from Item 8. Financial Statements and Supplementary
Data herein.
A discussion of the Partnership's current portion of long-term
debt is incorporated by reference from Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - General herein.
On May 3, 1996, the Partnership sold Holiday to an unrelated
third party for a price of $1,200,000. For financial reporting
purposes, a loss, after transaction expenses, of approximately
$79,000 was recorded in May 1996. For federal income tax
purposes, the Partnership recorded a loss, after transaction
expenses, of approximately $728,000. The net proceeds from the
sale, after payoff of the related mortgage debt and transaction
expenses, were approximately $858,000, which exceeded the
$817,000 in appraised net equity of Holiday included in the
appraised value of the Partnership's portfolio at the end of
1995.
On September 25, 1996, the Partnership sold a pad site at
Edgewood Plaza to an unrelated third party for a price of
approximately $220,000. For financial reporting purposes, a
gain, after transaction expenses, of approximately $76,000 was
recorded in September 1996. For federal income tax purposes, the
Partnership recorded a gain, after transaction expenses, of
approximately $82,000 in 1996. The pad site was not secured by
the Edgewood Plaza mortgage. The net proceeds from the sale,
after transaction expenses, were approximately $209,000.
On December 5, 1996, the Partnership sold a parcel of excess land
at Edgewood Plaza to an unrelated third party for a price of
$29,900. For financial reporting and federal income tax
purposes, the Partnership recorded a loss, after transaction
expenses, of $10,900 in 1996. The parcel of land was not secured
by the Edgewood Plaza mortgage. The net proceeds from the sale,
after transaction expenses, were approximately $29,000.
In September 1995, the Partnership obtained a loan secured by a
mortgage on Edgewood Plaza. This shopping center was previously
unencumbered. From loan proceeds of $1,400,000, $452,485 was
placed in escrow for a capital improvement plan at Edgewood. In
1996 and 1995, the Partnership expended the entire balance of the
Edgewood capital improvement escrow. The capital improvement
plan at Edgewood Plaza was substantially complete in July 1996.
The improvements to Edgewood Plaza include a new facade, roof and
parking lot resurfacing. The Partnership
<PAGE> 19
executed a lease modification with Santoni's Market, an anchor
tenant, requiring an annual rent increase of approximately
$25,000, which commenced July 1, 1996. Other tenants agreed to
annual rent increases which were also effective at that time.
From the Edgewood Plaza loan proceeds, $130,000 was placed in
escrow for environmental remediation work at the property. A
former tenant at Edgewood Plaza paid substantially all of the
costs incurred with respect to this remediation. In July 1996,
the $130,000 escrow for environmental remediation work at
Edgewood Plaza was released to the Partnership. The Partnership
received final closure from the Maryland Department of the
Environment in September 1996.
From the remaining loan proceeds, $707,905 was used to pay the
principal and accrued interest of the Berkeley Square shopping
center second priority mortgage due October 2, 1995 and the
balance was used for loan fees and closing costs, including
insurance and tax escrows, of approximately $70,000 and working
capital.
Rite-Aid, an anchor tenant leasing 6,400 square feet at Edgewood
Plaza, acquired property and constructed a free-standing retail
store directly across Route 755 from the shopping center. The
free-standing Rite-Aid opened in October 1996 and Rite-Aid closed
its store at Edgewood Plaza at that time. Rite-Aid's lease with
the Partnership expires July 31, 1999. The Partnership is
attempting to negotiate a termination agreement with Rite-Aid
regarding its lease obligation with the Partnership.
On October 7, 1996, the Partnership sold a parcel of excess land
at Jackson Heights to an unrelated third party for $40,000. For
financial reporting and federal income tax purposes, the
Partnership recorded a gain, after transaction expenses, of
$22,208. The purchaser constructed a restaurant franchised by a
national chain on property adjacent to Jackson Heights and the
parcel of land was required to meet parking needs. The net
proceeds of approximately $35,000 were applied to reduce the
mortgage on that property.
On December 29, 1995, the Partnership sold Orchard Square
shopping center to an unrelated third party for a contract price
of $5,250,000. For financial reporting purposes, the Partnership
recorded a loss on sale, after transaction expenses, of
$2,271,249 in December 1995. For federal income tax purposes, the
Partnership recorded a loss on sale, after transaction expenses,
of approximately $2,404,000 in 1995. At the time of sale, the
holder of the Orchard Square mortgage accepted $3,900,000 in
satisfaction of its mortgage, the principal balance and accrued
interest of which were $5,748,344 and $29,558, respectively. The
mortgage on Orchard Square was due and payable on demand. The
Partnership recorded the forgiveness of debt, net of transaction
expenses, as an extraordinary gain of $1,602,902 in December
1995. The lender agreed to forgive a portion of the debt on
Orchard Square in conjunction with a lease modification agreement
between the Partnership and A & P, an anchor tenant at that
center. The net effect of the Orchard Square transactions was a
loss of approximately $668,000 for financial reporting purposes.
The net proceeds of approximately $862,000 from the sale were
approximately equal to the net contribution of Orchard Square to
the Partnership's net asset value in 1994.
<PAGE> 20
In connection with the sale of Orchard Square, the Partnership
retained responsibility for certain environmental issues. In
February 1996, the Partnership's environmental consultants
completed their assessment to determine the extent of any
environmental liability and concluded that no remediation was
required. Their report was submitted to the applicable state
regulatory agency which is empowered to make its own independent
finding. That agency required the Partnership to conduct certain
soil testing and environmental remediation procedures which were
complete in August 1996. The Partnership received final closure
from the Georgia Department of Natural Resources in October 1996.
The Partnership incurred approximately $85,000 in costs related
to the testing and remediation procedures.
In November 1995, the Partnership completed the sale of a pad
site at its Berkeley Square property to an existing tenant. The
contract price was $217,000, of which $192,000 was applied to pay
down the principal balance of the mortgage debt on Berkeley
Square. A gain for financial reporting and federal income tax
purposes of approximately $172,000 was recorded in the fourth
quarter of 1995 in connection with this sale.
On August 6, 1996, the Partnership sold a pad site of
approximately 1.15 acres of land at Tarrytown Mall to an
unrelated third party for a price of $330,000. The pad site was
formerly occupied by an automotive center which vacated the space
May 31, 1996. The purchaser constructed a restaurant franchised
by a national restaurant chain. For financial reporting
purposes, a gain, after transaction expenses, of approximately
$154,000 was recorded in August 1996. For federal income tax
purposes, the Partnership recorded a gain, after transaction
expenses, of approximately $105,000 in 1996. The net proceeds
from the sale, after payment of transaction expenses, of
approximately $324,000 were placed in escrow with the first trust
lender to be used for one of the following three purposes: (i) to
fund tenant improvement work if a replacement tenant is found for
the Wholesale Depot space, (ii) to acquire an adjoining parcel of
land to enhance visibility and provide additional customer
parking at Tarrytown Mall or (iii) to reduce the principal amount
of the first trust loan.
In the fourth quarter of 1996, the Partnership recorded an
impairment charge of $2,895,000 to write-down the carrying value
of Tarrytown Mall to its fair value of $4,500,000 as of December
1, 1996. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
the assets, which include the land, building and improvements and
intangibles related to Tarrytown Mall, were determined to be
impaired because recent downward revisions in estimates indicated
future net cash flows would be insufficient to fully recover the
carrying value of this property. The revisions in estimates were
received in the fourth quarter of 1996, were not known before the
fourth quarter, and resulted in a lower valuation for Tarrytown
Mall in comparison to the prior year's valuation. Fair value was
determined by an independent appraisal based on an income
capitalization approach. The Partnership plans to continue
operating Tarrytown Mall and considers the center to be an asset
to be held and used until an offer is received that is deemed
satisfactory by the Partnership regarding disposal of the
property with a capable buyer. Any plan is contingent upon the
outcome of discussions with the first trust lender, which the
Partnership intends to initiate in the second quarter of 1997,
regarding the required principal payments on the first trust
mortgage. The payments are scheduled to increase effective July
1, 1997. The discussion of Tarrytown Mall's
<PAGE> 21
debt is incorporated by reference from Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - General. In January 1997, the Partnership initiated
discussions with Tarrytown Mall's second trust mortgage lender
regarding the disposition of that center. No definitive plan of
disposition has been adopted.
In the fourth quarter of 1995, the Partnership recorded a charge
of $2,606,156 to reflect the Partnership's revised estimate of
net realizable value of Tarrytown Mall at that time based on the
decline in the appraisal value to a level below the outstanding
balance of the mortgage debt on the property. The $2,606,156
represented the sum of the difference of $2,542,295 between the
net book value of Tarrytown Mall's land, building and
improvements and the balance of the mortgage debt and accrued
interest as of December 31, 1995, plus the write-off of $63,861
in tenant rent receivables related to the recording of rental
income on a straight-line basis. The Partnership's net equity in
the property for financial reporting purposes was effectively
treated as zero. This action was required due to unsuccessful
efforts to lease the vacant space.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday
Shopping Center. The Partnership recorded a net charge of
$1,047,746 for the write-down of leasehold improvements related
to Wholesale Depot, a former anchor tenant which leased 79,066
square feet at Tarrytown Mall. The leasehold improvements which
were placed in service in December 1993 were incurred as a direct
result of specifications within the Partnership's lease with
Wholesale Depot. Wholesale Depot filed for reorganization under
the provisions of Chapter XI of the U.S. Bankruptcy Code in May
1994. Wholesale Depot vacated its space at Tarrytown Mall in
late June 1994 and rejected its lease on October 7, 1994. The
Partnership also recorded a charge of $540,000 in 1994 to reflect
the Partnership's revised estimate of net realizable value of
Holiday Shopping Center at that time. The write-down reflected
the Partnership's intention to offer the property for sale in
1995. The $540,000 represented the difference between Holiday's
carrying value and estimated net realizable value from the sale
of the center and operating the center until sale.
The Partnership continues to solicit potential replacement
tenants for the Tarrytown Mall anchor space. Given competitive
conditions in the marketplace, there is no assurance that a
replacement tenant will be found. The Partnership continues to
consider all available options in seeking to lease the space.
In 1996, depreciation charges with respect to Tarrytown Mall were
approximately $334,000 and accruals of unpaid interest arising
under the mortgage were $431,000. At December 31, 1996,
Tarrytown Mall was subject to $7,059,937 in mortgage
indebtedness, of which $1,674,940 is represented by a first trust
mortgage and $5,384,997 is represented by a second trust
mortgage. In addition, at December 31, 1996, $16,100 of interest
was accrued with respect to the first mortgage and $908,632 of
interest was accrued with respect to the second mortgage. Both
the first and second mortgages (principal and interest) are
nonrecourse to the Partnership. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - General for a discussion of the Partnership's
payment obligations related to the Tarrytown Mall first and
second trust mortgages.
<PAGE> 22
Escrows and prepaid expenses and other assets in the
Partnership's financial statements include approximately $555,202
with respect to Tarrytown Mall which is pledged to secure
mortgage debt related to that property. Interest payable
includes approximately $924,732 with respect to Tarrytown Mall,
which is payable out of cash flow from operations and sale or
refinancing proceeds from that property and is not reflective of
the fact that the principal and interest related to the Tarrytown
Mall mortgages are nonrecourse to the Partnership.
In 1994, 1995 and 1996, approximately $275,000, $505,000 and
$108,000, respectively, was expended for tenant fit-up and other
shopping center improvements. In addition, the Partnership
expended approximately $163,000 and $279,000 in 1995 and 1996,
respectively, from the capital improvement escrow related to
Edgewood Plaza. The Partnership is currently obligated to expend
approximately $125,000 in 1997 for tenant fit-up costs in
connection with signed tenant leases and other committed capital
expenditures. This amount is expected to be funded from
Partnership cash reserves. This amount does not include tenant
improvement expenditures that may be required for future or
existing tenants or for shopping center improvements. The
Partnership is currently negotiating a lease for a tenant at
Quality Center for 13,887 square feet. The Partnership's
obligation for tenant fit-up and leasing commission with respect
to this lease is estimated to be approximately $192,000.
The Partnership executed a lease modification with the Food Lion
store at Woodlawn Village for an expansion of its store from
25,000 to 32,744 square feet. The expansion which was
substantially complete in February 1997 added 4,444 square feet
to the center and converted 3,300 square feet of in-line space to
Food Lion use. Food Lion's rent increased by $25,500 annually
effective January 1997. As part of the lease modification, Food
Lion funded substantially all of the expansion costs. The
expansion was designed to add to the stability of the center.
During late 1993 and into 1994, affiliates of Realty Capital IV
Limited Partnership discussed the possible sale of the
Partnership's shopping centers to a limited partnership, of which
a real estate investment trust ("FWREIT") formed by affiliates of
FW Realty Limited Partnership serves as the sole general partner.
These discussions were discontinued without reaching agreement as
the stock market valuations of real estate investment trusts
owning strip and neighborhood shopping centers fell and the
Partnership's portfolio faced significant issues potentially
affecting values at Tarrytown Mall, Quality Center and Orchard
Square.
In the fourth quarter of 1995, discussions between Realty Capital
IV Limited Partnership on behalf of the Partnership and FWREIT
were reopened regarding the possible sale for cash of the
Partnership's shopping centers to an affiliate of FWREIT. In
1996, these discussions were deferred while the possibility of
selling certain of the Partnership's shopping centers through
third party brokers is explored.
The General Partners currently intend to attempt to sell the
Partnership's assets and distribute the net proceeds to
Unitholders. To that end, the Partnership sold Orchard Square in
December 1995 and Holiday in May 1996, and has entered into an
agreement to sell Cloister. In March 1997, the Partnership
entered into an agreement to sell Cloister to an unrelated third
party for a contract price
<PAGE> 23
of $2,650,000. The contract is subject to material contingencies
and for that reason there can be no assurance a sale transaction
will occur. Four other properties, Lynnwood Place, Highlandtown
Village, Jackson Heights and Berkeley Square, are listed for sale
with brokers active in the markets where these centers are
located.
With respect to the four remaining properties, the General
Partners have adopted the following strategies: (i) Woodlawn
Village will be listed for sale in the second quarter of 1997
following the completion of the Food Lion expansion in the first
quarter of 1997; (ii) the listing of Edgewood Plaza will await
the outcome of negotiations with Rite-Aid regarding its anchor
space; (iii) the listing of Quality Center will await further
progress in the Partnership's attempt to reposition Quality
Center from a factory outlet center to a neighborhood and
community convenience center; and (iv) the disposition of
Tarrytown Mall will be resolved following discussions with that
center's mortgage lenders. In the meantime, the Partnership will
continue to operate all of its properties.
The Partnership considers its properties to be long-lived assets
to be held and used. The General Partners have not committed to
a formal plan to dispose of these properties whether by sale or
abandonment if suitable offers are not received. The
Partnership's policy is to classify its assets as held for sale
when the Partnership has formally committed to dispose of the
properties whether by sale or abandonment. If the Partnership
should formally commit to a plan of disposition, the Partnership
would appropriately address the issue of classifying the property
or properties as held for sale at that time and discontinue
depreciating the property or properties.
The Partnership's operations, as well as the financial condition
of certain of its tenants, have been adversely affected by
competitive economic conditions. If the Partnership is not able
to fund its cash requirements from operations, the Partnership
may be required to seek additional financing. The Partnership
could be adversely affected by the increased standards employed
by lenders to determine the amount, terms and underwriting
requirements for such financing, all of which have affected the
amount and cost of borrowing. If additional borrowing or
refinancing is not available, the Partnership may be required to
sell one or more of its shopping center properties. There is no
assurance that loans would be available, or that the Partnership
would be able to sell a particular shopping center, or that the
terms of such loans or any sales would be advantageous to the
Partnership. Furthermore, if alternative sources of cash were
needed and not found, the Partnership could default on its
obligations, including its obligations to pay debt service and
mortgage interest, which could result in the foreclosure by its
mortgage lenders of one or more shopping centers.
The Partnership valued its nine shopping center portfolio as of
December 1, 1996 and its ten shopping center portfolio as of
December 31, 1995 in order to provide certain information
required by retirement account investors. All of the
Partnership's properties were appraised at year end by an
independent MAI appraiser. A description of the methodology used
by the appraiser and the appraised values of each of the shopping
centers is incorporated by reference from Item 2. Properties
herein. The resulting aggregate appraised value of the
Partnership's shopping centers as of December 31, 1996, less the
Partnership's mortgages and after certain other adjustments
resulted in a valuation of the Partnership's net assets at
approximately $12,223,000. Based on 1,200,000 Assignee Limited
Partnership Units (the "Units") outstanding, this equates to
approximately $10.19
<PAGE> 24
per Unit. In the case of Tarrytown Mall, the net equity in the
center is deemed to be zero, reflecting an appraisal below
existing mortgage debt.
The aggregate appraised value of the Partnership's shopping
centers as of December 31, 1995, less the Partnership's mortgages
and other adjustments resulted in a valuation of the
Partnership's net assets at approximately $13,052,000. Based on
1,200,000 Units outstanding, this equated to approximately $10.88
per Unit. See Item 2. Properties herein for information
regarding the December 31, 1995 appraisal and a discussion of the
decrease in the value per Unit.
The appraised value of the Partnership's shopping centers should
not be relied upon as an indication of realizable value at the
present time or at any time in the future. Furthermore, the
methods and assumptions used by the appraiser in preparing the
appraisal report are those that the appraiser, in its
professional judgment, concluded were appropriate. There is no
assurance that such assumptions will materialize or that other or
different methods or assumptions that would result in lower
values might not be appropriate. The intent of the Partnership
has been to hold, maintain and increase the value of its shopping
centers until sale of the properties at values satisfactory to
the Partnership can be achieved. The General Partners are
currently attempting to complete the sale of the Partnership's
assets and distribute the net proceeds to Unitholders by the end
of 1997. In the meantime, the Partnership will continue to
operate the properties. No definitive plan of disposition beyond
listing the centers for sale has been adopted by the Partnership.
INFLATION, RECESSION AND OTHER FACTORS
Over the past several years inflationary pressure has been
relatively modest and has not had a significant effect on the
Partnership's operations. Many of the Partnership's expenses
could, however, be affected by inflation. If inflation rises,
operating expenses could increase to a level where they could not
be passed on to tenants through higher rents. The competitive
state of the real estate market also has made it more difficult
to increase rents. With the exception of Berkeley Square and
Jackson Heights, a majority of the tenant leases at the
Partnership's shopping centers provide for reimbursement by
tenants for some or all operating expenses. In most cases,
tenant reimbursement payments are payable monthly, although in
some cases such payments are to be made annually.
In addition, inflation can impact interest rates charged by
lenders. Certain Partnership mortgage loans have early maturity
or interest rate adjustment dates which may require the
Partnership to negotiate interest rates and other loan terms
during a period when lending terms are strict and/or interest
rates are rising. An increase in expenses or interest rates due
to inflation could have an adverse effect on the Partnership by
reducing cash flow from operations and reducing the market value
of shopping centers. There is no assurance that inflation would
not have an adverse effect on the future operations of the
Partnership.
<PAGE> 25
RESULTS OF OPERATIONS
The net income (loss) for each shopping center for the three
years ended December 31, 1996, 1995, and 1994 was as follows:
<TABLE>
<CAPTION>
NET INCOME (LOSS)
SHOPPING CENTER 1996 1995 1994
<S> <C> <C> <C>
Woodlawn Village ($49,889) ($51,281) ($61,230)
Lynnwood Place (130,643) (201,574) (185,286)
Highlandtown Village 38,214 34,102 17,262
Jackson Heights 164,376 113,131 49,974
Holiday 8,838 27,249 (511,444)
Orchard Square - 48,467 204,269
Cloister 61,129 68,375 97,450
Edgewood 81,333 105,306 162,054
Tarrytown Mall (3,406,679) (2,940,495) (1,286,716)
Berkeley Square 62,237 (62,125) (22,478)
Quality Center (90,017) (282,291) (36,032)
Subtotal (3,261,101) (3,141,136) (1,572,177)
Other expenses (126,970) (140,859) (144,980)
Loss on sale of centers (78,687) (2,271,249) -
Gain - forgiveness of debt - 1,602,902 -
Gain on sale of pad sites 241,290 171,877 -
($3,225,468) ($3,778,465) ($1,717,157)
</TABLE>
Results of Operations for the Three Years Ended December 31, 1996
General
During 1996, the Partnership owned and operated ten shopping
centers until May 3, 1996 when Holiday shopping center was sold.
During 1995, the Partnership owned and operated eleven shopping
centers until December 29, 1995 when Orchard Square shopping
center was sold. During 1994, the Partnership owned and operated
eleven shopping centers for the entire period.
1996 Compared to 1995
The Partnership reported a decrease in net loss of $552,997 from
a net loss of $3,778,465 in 1995 to a net loss of $3,225,468 in
1996. The significant factors contributing to the decreased net
loss in 1996 were the net loss on the sale of a shopping center
of $78,687 in 1996 in comparison to $2,271,249 in 1995; gains on
the sales of pad sites in 1996 totaling $241,290 in comparison to
$171,877 in 1995; an increase in interest income; declines in
interest, depreciation, taxes and insurance, management and
leasing, and other expenses; and a lower provision for doubtful
accounts. These factors were partially offset by declines in
rental income and tenant reimbursement income; and an
extraordinary gain related to forgiveness of debt in 1995 of
$1,602,902 with no comparable transaction in 1996. A substantial
portion of these variances in income and expense can be
attributed to the sale of Orchard Square on December 29, 1995,
the increase in losses at
<PAGE> 26
Tarrytown Mall and the sale of Holiday on May 3, 1996.
The Partnership's total income decreased $949,395 from $7,426,069
in 1995 to $6,476,674 in 1996. The change in total income
consisted of a decrease in rental income of $884,177 from
$6,288,608 in 1995 to $5,404,431 in 1996 and a decrease in tenant
reimbursement income of $65,218 from $1,137,461 in 1995 to
$1,072,243 in 1996.
Rental income declined primarily due to the sale of Orchard
Square in December 1995, the sale of Holiday in May 1996 and a
decline in rental income at Tarrytown Mall of $223,720. Orchard
Square had rental income of $809,395 in 1995. Rental income with
respect to Holiday decreased $118,942 in 1996 as compared to 1995
as a result of the sale of that center. Five of the shopping
centers had decreases in tenant reimbursement income including a
significant decrease at Tarrytown Mall of $50,884. Tenant
reimbursement income at Orchard Square was $141,466 in 1995. The
declines in rental income and tenant reimbursement income at
Tarrytown Mall were primarily the result of the loss of income
recorded with respect to the Wholesale Depot lease obligations,
as well as a 3% decrease in Tarrytown Mall's leased percentage.
Tarrytown Mall was 61% and 64% leased at December 31, 1996 and
1995, respectively.
These declines in rental income were partially offset by
increases in rental income at seven shopping centers, including
significant increases at Quality of $130,994, Berkeley Square of
$31,312, Jackson Heights of $33,316, and Edgewood Plaza of
$26,714. The increases in rental income at Quality Center,
Berkeley Square and Jackson Heights can be attributed to leasing
activity at those shopping centers. Quality Center, Berkeley
Square and Jackson Heights were 73%, 97% and 100% leased,
respectively, at December 31, 1996. This represented increases
of 3% at Quality Center, 2% at Berkeley Square and 1% at Jackson
Heights from the leased percentages at December 31, 1995. The
increase in rental income at Edgewood Plaza was primarily due to
increased rental rates commencing July 1, 1996 when the capital
improvement plan at that center was substantially complete as
well as other tenant rollovers. Edgewood Plaza was 100% leased
at December 31, 1996 and 1995.
The following changes in leased percentages also contributed to
changes in rental income and tenant reimbursement income during
the year. Cloister was 95% leased at December 31, 1996, which
represented an increase of 5% compared to December 31, 1995.
Highlandtown Village and Woodlawn remained unchanged at December
31, 1996 at 100% and 93% leased, respectively. Lynnwood Place
was 95% leased at December 31, 1996, a decrease of 3% from
December 31, 1995. The Partnership's aggregate portfolio was 84%
leased at December 31, 1996 and 1995. The Partnership's shopping
center portfolio at December 31, 1996 represented nine centers
with approximately 945,000 leasable square feet. The
Partnership's portfolio at December 31, 1995 represented ten
centers with approximately 1,034,000 leasable square feet.
Total operating expenses decreased $761,711 from $10,739,166 in
1995 to $9,977,455 in 1996. The decrease in total operating
expenses can primarily be attributed to the sale of Orchard
Square in December 1995 and the sale of Holiday in May 1996.
Total operating expenses at Orchard Square were $902,394 in 1995.
Total operating expenses at Holiday declined $101,552 from 1995
to 1996.
<PAGE> 27
Interest expense decreased $429,408 from $3,188,433 in 1995 to
$2,759,025 in 1996 primarily due to the sale of Orchard Square
which had interest expense of $347,658 in 1995, and declines in
interest expense at Berkeley Square of $72,644 and Lynnwood Place
of $22,080. Interest expense at Berkeley Square declined due to
the paydown of long-term debt for that shopping center in the
fourth quarter of 1995. Interest expense at Lynnwood Place
declined as a result of a decrease in the interest rate in July
1995. These declines in interest expense were partially offset
by an increase of $86,017 at Edgewood Plaza in 1996 as a result
of the Partnership obtaining a loan of $1,400,000 in September
1995 secured by this shopping center which was previously
unencumbered.
In the fourth quarter of 1996, the Partnership recorded an
impairment charge of $2,895,000 in comparison to the charge of
$2,606,156 in 1995. In 1996, the charge of $2,895,000
represented the amount required to write-down the carrying value
of Tarrytown Mall to its fair value of $4,500,000 as of December
1, 1996. In 1995, the charge of $2,606,156 reflected the
Partnership's revised estimate of the net realizable value of
Tarrytown Mall at that time based on the decline in the appraisal
value to a level below the outstanding balance of the mortgage
debt on the property. The $2,606,156 represented the sum of the
difference of $2,542,295 between the net book value of Tarrytown
Mall's land, building and improvements and the balance of the
mortgage debt and accrued interest as of December 31, 1995, plus
the write-off of $63,861 in tenant rent receivables related to
the recording of rental income on a straight-line basis.
Depreciation expense decreased $215,426 from $1,598,697 in 1995
to $1,383,271 in 1996 primarily due to the sale of Orchard Square
and Holiday. Depreciation expense at Orchard Square was $185,077
in 1995. Depreciation expense at Holiday declined $40,440 from
1995 to 1996.
Repairs and maintenance expense increased $40,557 from $880,272
in 1995 to $920,829 in 1996. Significant changes in repairs and
maintenance expense included increases at Tarrytown Mall of
$31,533, Quality Center of $26,925 and Berkeley Square of
$26,694. Repairs and maintenance expense at Orchard Square was
$69,395 in 1995.
Real estate tax expense decreased $69,536 from $681,870 in 1995
to $612,334 in 1996. This net decrease was primarily
attributable to the sale of Orchard Square which had real estate
tax expense of $68,135 in 1995. Management and leasing to
related parties decreased $42,429 from $428,756 in 1995 to
$386,327 in 1996. Management and leasing at Orchard Square was
$55,325 in 1995.
The aggregate provision for doubtful accounts was $172,159 in
1995 and $73,599 in 1996. The provisions related to ten of the
Partnership's shopping centers were lower in 1996 as compared to
1995. The provisions related to Cloister and Berkeley Square
were lower by $29,327 and $35,777, respectively, primarily as a
result of the receivables related to one tenant at Cloister and
three tenants at Berkeley Square which were included in the
provision for doubtful accounts in 1995 and either written-off or
partially collected in 1996.
Other expenses decreased $241,999 from $933,930 in 1995 to
$691,931 in 1996. The decrease can be attributed to the
following changes: (i) a decline of $87,951 in total other
expenses at Orchard Square; (ii) decreases in administrative
expense at Quality Center of $24,667 and Edgewood Plaza
<PAGE> 28
of $21,797; (iii) decreases in legal expenses at Tarrytown Mall
and Quality Center of $45,410 and $18,732, respectively, and (iv)
the reversal in 1996 of a reserve of $30,000 recorded in 1995 for
estimated environmental remediation costs required at Edgewood as
a former tenant paid these expenses. The decrease in
administrative expense at Quality Center was primarily due to an
adjustment in 1995 in the marketing fund as a result of a decline
in tenant contributions for that period and prior periods based
on occupancy at the property. The decrease in legal expense at
Tarrytown Mall was due to expenses incurred in 1995 related to
the bankruptcy of Wholesale Depot and lease negotiations with a
potential tenant for the Wholesale Depot space. The decrease in
legal expense at Quality Center was due to expenses incurred in
1995 related to the unsuccessful negotiations with a potential
buyer for that shopping center.
Interest income increased $81,608 from $31,102 in 1995 to
$112,710 in 1996. The increase in interest income was primarily
the result of increasing cash balances predominantly due to
proceeds from the sale of Orchard Square in December 1995 and
Holiday in May 1996.
1995 Compared to 1994
The Partnership reported an increase in net loss of $2,061,308
from a net loss of $1,717,157 in 1994 to a net loss of $3,778,465
in 1995. The significant factors contributing to the increased
net loss in 1995 were the write-down of assets of $2,606,156 in
1995 in comparison to $1,587,746 in 1994; declines in rental
income and tenant reimbursement income; an increase in other
expenses; and a loss on sale of shopping center. These changes
were partially offset by a gain on forgiveness of debt and
decreases in depreciation, amortization and management and
leasing expenses.
The Partnership's total income decreased $481,666 from $7,907,735
in 1994 to $7,426,069 in 1995. The change in total income
consisted of a decrease in rental income of $248,710 from
$6,537,318 in 1994 to $6,288,608 in 1995 and a decrease in tenant
reimbursement income of $232,956 from $1,370,417 in 1994 to
$1,137,461 in 1995. Five of the Partnership's eleven shopping
centers had decreases in rental income, including significant
decreases at Tarrytown Mall of $178,033 and Quality Center of
$166,374. Nine of the shopping centers had decreases in tenant
reimbursement income including significant decreases at Tarrytown
Mall of $79,604 and Lynnwood Place of $75,696. The decreases in
rental income and tenant reimbursement income at Tarrytown Mall
were primarily the result of the decline in income recorded with
respect to the Wholesale Depot lease obligations, as well as a 2%
decrease in Tarrytown Mall's leased percentage. Tarrytown Mall
was 64% and 66% leased at December 31, 1995 and 1994,
respectively. The decrease in rental income at Quality Center
was due to the loss of a number of tenants at the center.
However, Quality Center's leased percentage increased 11% to 70%
leased at December 31, 1995 from 59% at December 31, 1994. The
increase of 11% in 1995 primarily resulted from the addition of
two tenants leasing an aggregate of 12,482 square feet, partially
offset by the loss of one tenant which leased 5,885 square feet.
Two tenants which leased 11,132 square feet vacated Quality
Center in December 1994. The decrease in tenant reimbursement
income at Lynnwood Place can be attributed to a reduction in real
estate tax tenant reimbursements and to adjustments for prior
year accruals. Lynnwood Place was 98% leased at December 31,
1995, a decrease of 2% from December 31, 1994.
<PAGE> 29
These decreases in rental income and tenant reimbursement income
were partially offset by increases in rental income at six
shopping centers, including an increase of $78,183 at Jackson
Heights and increases in tenant reimbursement income at two
shopping centers. The increase in tenant reimbursement income at
Jackson Heights was primarily due to leasing activity during 1994
at the shopping center. Jackson Heights was 99% leased at
December 31, 1995 and 1994.
The following changes in leased percentages also contributed to
changes in rental income and tenant reimbursement income during
the year. Berkeley Square, Holiday and Highlandtown Village were
95%, 90% and 100% leased, respectively, at December 31, 1995.
This represented increases of 12% at Berkeley Square, 6% at
Holiday and 2% at Highlandtown Village compared to December 31,
1994. The 12% increase at Berkeley Square primarily resulted
from the addition of three tenants leasing an aggregate of 13,456
square feet. Edgewood Plaza and Woodlawn remained unchanged at
December 31, 1995 at 100% and 93% leased, respectively. Cloister
was 90% leased at December 31, 1995, a decrease of 10% from
December 31, 1994. The 10% decline primarily resulted from the
loss of three tenants which leased an aggregate of 5,329 square
feet. The Partnership's aggregate portfolio was 84% leased at
December 31, 1995 and 1994. The Partnership's shopping center
portfolio at December 31, 1995 represented ten centers with
approximately 1,034,000 leasable square feet after the sale of
Orchard Square on December 29, 1995. The portfolio at December
31, 1994 represented eleven shopping centers with approximately
1,120,000 square feet.
Total operating expenses increased $1,103,513 from $9,635,653 in
1994 to $10,739,166 in 1995. The increase in total operating
expenses can primarily be attributed to a higher write-down of
assets in 1995 compared to 1994 and an increase in other
expenses. These increases were partially offset by declines in
depreciation and amortization expenses.
In the fourth quarter of 1995, the Partnership recorded a charge
of $2,606,156 to reflect the Partnership's revised estimate of
net realizable value of Tarrytown Mall based on the decline in
the appraisal value to a level below the outstanding balance of
the mortgage debt on the property. The $2,606,156 represents the
sum of the difference of $2,542,295 between the net book value of
Tarrytown Mall's land, building and improvements and the balance
of the mortgage debt and accrued interest as of December 31,
1995, plus the write-off of $63,861 in tenant rent receivables
related to the recording of rental income on a straight-line
basis.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday
Shopping Center. The Partnership recorded a net charge of
$1,047,746 for the write-down of leasehold improvements related
to Wholesale Depot, a former anchor tenant which leased 79,066
square feet at Tarrytown Mall. The additional charge of $540,000
in 1994 represented an adjustment to the carrying value of
Holiday to the Partnership's revised estimate of the center's net
realizable value. This write-down reflected the Partnership's
intention to offer this property for sale in 1995.
Other expenses increased $258,329 from $675,601 in 1994 to
$933,930 in 1995. The increase can be attributed to the
following changes: (i) $64,308 incurred for financing fees in
1995 at Orchard
<PAGE> 30
Square related to the Partnership's attempt to obtain a new
mortgage loan; (ii) an increase in administrative expense at
Quality Center of $63,472; (iii) increases in legal expenses at
Tarrytown Mall and Quality Center of $37,517 and $21,874,
respectively, and (iv) $30,000 recorded in 1995 for the estimated
environmental remediation work required at Edgewood. The
increase in administrative expense at Quality Center was
primarily due to an adjustment in the marketing fund as a result
of a decline in tenant contributions for this period and prior
periods based on occupancy at the property. The increase in
legal expense at Tarrytown Mall was related to the bankruptcy of
Wholesale Depot and lease negotiations with a potential tenant
for the Wholesale Depot space. The increase in legal expense at
Quality Center was related to unsuccessful negotiations with a
potential buyer.
Depreciation expense decreased $86,761 from $1,685,458 in 1994 to
$1,598,697 in 1995. This decrease was primarily the result of
the write-down of the leasehold improvements related to Wholesale
Depot at Tarrytown Mall in the fourth quarter of 1994.
Amortization expense decreased $51,430 from $143,540 in 1994 to
$92,110 in 1995. The decrease can be attributed to a decline in
amortization expense at Lynnwood Place of $29,217 due to full
amortization of loan costs in the second quarter of 1994 and a
decline at Orchard Square of $29,620 due to the full amortization
of loan costs in December 1994.
The aggregate provision for doubtful accounts was $194,554 in
1994 and $172,159 in 1995. The provision related to Tarrytown
Mall was lower by $78,812 in 1995 as compared to 1994 as a result
of the loss of several significant tenants at that property in
1994. In consideration of these losses at Tarrytown Mall and the
related tenants' outstanding receivable balances, the allowance
for doubtful accounts related to that center was increased at
December 31, 1994. This resulted in an unusually high provision
for doubtful accounts for the year ended December 31, 1994.
During 1995, approximately $40,000 of the Tarrytown Mall tenant
receivables outstanding at December 31, 1994 were written-off and
the majority of the remaining balance of these receivables was
collected. As a result of these write-offs and collections and
the decline in the current year receivables, the allowance for
doubtful accounts was reduced at December 31, 1995 and the
corresponding provision for 1995 was therefore lower.
Shopping Center by Shopping Center Analysis of Material Changes
in the Results of Operations for the Three Years Ended December
31, 1996
The following discussion reflects changes in the specific
elements of income or expense with respect to the Partnership's
centers during the three years ended December 31, 1996. For
purposes of the following analysis, rental income consists of
rents paid by tenants occupying space in each shopping center and
rental income accrued for adjustments for rent abatements and
scheduled rent increases.
Woodlawn Village: Net loss decreased to $49,889 in 1996 from
$51,281 in 1995. Net loss was $61,230 in 1994. Changes in
individual elements of income and expenses during 1996 and 1995
were not significant to the Partnership considered as a whole.
<PAGE> 31
Rental income increased less than 1% to $284,999 in 1996 from
$283,557 in 1995. Rental income was $272,047 in 1994. As of
December 31, 1996, 1995 and 1994, Woodlawn Village was
approximately 93% leased.
Lynnwood Place: Net loss decreased to $130,643 in 1996 from
$201,574 in 1995. Net loss was $185,286 in 1994. The decrease
in net loss in 1996 was primarily the result of increases in
rental and tenant reimbursement income totalling $52,978 and a
decline in interest expense of $22,080. Rental and tenant
reimbursement income increased in 1996 due to changes in
occupancy throughout the two years and due to nonrecurring
adjustments made in 1995. Interest expense decreased in 1996 as
a result of a decrease in the interest rate in July 1995. The
increase in net loss in 1995 can primarily be attributed to a
decrease in tenant reimbursement income, offset in part by a
decline in interest and amortization expenses. The decrease in
tenant reimbursement income in 1995 at Lynnwood Place can be
attributed to a reduction in real estate tax tenant
reimbursements and to adjustments for prior year accruals.
Rental income increased approximately 2% to $807,255 in 1996 from
$789,924 in 1995. Rental income was $778,111 in 1994. As of
December 31, 1996, Lynnwood Place was approximately 95% leased, a
decrease from 98% as of December 31, 1995. Lynnwood was 100%
leased as of December 31, 1994. The increases in rental income
in 1996 and 1995 are primarily attributable to changes in
occupancy. Lynnwood Place was 100% leased throughout most of
1996.
Highlandtown Village: Net income increased to $38,214 in 1996
from $34,102 in 1995. Net income was $17,262 in 1994. The
increase in net income in 1996 consisted of an increase in total
income offset in part by an increase in total expenses. Tenant
reimbursement income increased $35,324 to $272,611 in 1996 from
$237,287 in 1995. Tenant reimbursement income was $269,608 in
1994. The increases in net income in 1995 can be attributed to a
decrease in total expenses, offset in part by a decline in total
income.
Rental income increased approximately 3% to $574,278 in 1996 from
$558,979 in 1995. Rental income was $534,605 in 1994. As of
December 31, 1996 and 1995, Highlandtown Village was
approximately 100% leased. Highlandtown Village was 98% leased
as of December 31, 1994. The changes in rental income in 1996
and 1995 are primarily attributable to changes in occupancy.
Jackson Heights: Net income increased to $164,376 in 1996 from
$113,131 in 1995. Net income was $49,974 in 1994. The increase
in net income in 1996 can primarily be attributed to an increase
in rental income and a decline in total expenses of $18,280. The
increase in net income in 1995 can be attributed to an increase
in rental income.
Rental income increased approximately 5% to $694,794 in 1996 from
$661,478 in 1995. Rental income was $583,295 in 1994. As of
December 31, 1996, Jackson Heights was 100% leased, which
represented an increase from 99% leased at December 31, 1995.
Jackson Heights was approximately 99% leased as of December 31,
1994. The increase in rental income in 1996 and 1995 can
primarily be attributed to changes in occupancy.
<PAGE> 32
Holiday: This center reported net income of $8,838 in 1996, net
income of $27,249 in 1995 and net loss of $511,444 in 1994. The
changes in individual elements of income and expenses during 1996
can primarily be attributed to the sale of Holiday on May 3,
1996. The increase in net income in 1995 can primarily be
attributed to the write-down of assets of $540,000 in 1994 to
adjust the carrying value of Holiday to its estimated net
realizable value, since it was the Partnership's intention to
offer the property for sale in 1995. There was no comparable
adjustment in 1995.
Rental income was $68,221 in 1996, $187,163 in 1995, and $189,508
in 1994. As of December 31, 1995, Holiday was approximately 90%
leased, an increase from approximately 84% as of December 31,
1994. The changes in rental income in 1995 was primarily
attributable to changes in occupancy.
Orchard Square: Orchard Square was sold on December 29, 1995.
Net income decreased to $48,467 in 1995 from net income of
$204,269 in 1994. The decline in net income in 1995 can be
attributed to a decrease in total income of $70,538 and an
increase in other expenses of $97,988.
Rental income decreased approximately 5% to $809,395 in 1995 from
$854,531 in 1994. As of December 31, 1994, Orchard Square was
approximately 94% leased. The decrease in rental income in 1995
can be attributed to changes in occupancy and an increase in
rental abatements as a result of A&P closing its store in August
1994.
Cloister: Net income decreased to $61,129 in 1996 from $68,375
in 1995. Net income was $97,450 in 1994. The decrease in net
income in 1996 was primarily the result of a decline in total
income of $35,755 which was partially offset by a decline in
total expenses of $28,510. The decrease in net income in 1995
can primarily be attributed to an increase in interest expense of
$29,431 due to adjustments in the interest rate on the Cloister
mortgage which floats at prime plus 1.25%.
Rental income decreased approximately 4% to $394,806 in 1996 from
$409,231 in 1995. Rental income was $402,227 in 1994. As of
December 31, 1996, Cloister was approximately 95% leased, an
increase from 90% as of December 31, 1995. Cloister was 100%
leased at December 31, 1994. The changes in rental income in
1996 and 1995 are primarily attributable to changes in occupancy.
Edgewood: Net income decreased to $81,333 in 1996 from $105,306
in 1995. Net income was $162,054 in 1994. The decrease in net
income in 1996 was primarily the result of an increase in
interest expense of $86,017 in 1996 which was partially offset by
an increase in total income of $37,003. The Partnership obtained
a loan of $1,400,000 in September 1995 secured by this shopping
center which was previously unencumbered. The decrease in net
income in 1995 can primarily be attributed to interest expense
recorded in 1995 of $33,848 and a $30,000 charge recorded in 1995
for the estimated environmental remediation work required at
Edgewood. There was no comparable environmental expense in 1994.
Rental income increased approximately 8% to $318,378 in 1996 from
$291,664 in 1995. Rental income was $281,654 in 1994. As of
December 31, 1996, 1995, and 1994, Edgewood was 100%
<PAGE> 33
leased. The changes in rental income in 1996 and 1995 are
primarily attributable to changes in rental rates. The increase
in rental income in 1996 was predominantly due to increased
rental rates commencing July 1, 1996 when the capital improvement
plan at Edgewood Plaza was substantially complete as well as
other tenant rollovers.
Tarrytown Mall: Net loss increased to $3,406,679 in 1996 from
$2,940,495 in 1995. Net loss was $1,286,716 in 1994. The
increases in net loss in 1996 and 1995 can primarily be
attributed to increases in the write-down of assets each year and
declines in rental and tenant reimbursement income. In 1996, the
Partnership recorded a write-down of assets of $2,895,000 in
comparison to $2,606,156 in 1995. The Partnership recorded a
write-down of assets of $1,047,746 in 1994. See the discussions
under the caption Liquidity and Capital Resources incorporated by
reference from Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and under Note H of
Notes to Financial Statements incorporated by reference from Item
8. Financial Statements and Supplementary Data herein. Rental
and tenant reimbursement income decreased $274,604 to $1,041,757
in 1996 from $1,316,361 in 1995. The decline was primarily the
result of the loss of income recorded with respect to the
Wholesale Depot lease obligations. Wholesale Depot terminated
its lease at Tarrytown Mall on October 7, 1994. Total income for
1995 included approximately $249,400 of rental income and $63,200
of tenant reimbursement income with respect to the Wholesale
Depot lease.
Rental and tenant reimbursement income decreased $257,637 to
$1,316,361 in 1995 from $1,573,998 in 1994. The decrease in
income was primarily the result of the decline in income recorded
with respect to the Wholesale Depot lease obligations. These
changes contributing to the increased net loss in 1995 were
partially offset by decreases in depreciation expense and a lower
provision for doubtful accounts. Depreciation expense decreased
$93,111 to $337,005 in 1995 from $430,116 in 1994. The decline
in depreciation expense was primarily the result of the write-
down of the leasehold improvements related to Wholesale Depot at
Tarrytown Mall in the fourth quarter of 1994. The provision for
doubtful accounts was $16,848 in 1995 which was lower by $78,812
in comparison to $95,660 in 1994 primarily due to the loss of
several significant tenants at that property in 1994.
Rental income decreased approximately 20% to $877,052 in 1996
from $1,100,772 in 1995. Rental income was $1,278,805 in 1994.
As of December 31, 1996, Tarrytown was approximately 61% leased,
a decrease from approximately 64% leased as of December 31, 1995.
Tarrytown was 66% leased as of December 31, 1994. The decrease
in rental income in 1996 and 1995 was primarily the result of the
bankruptcy of Wholesale Depot.
Berkeley Square: This center reported net income of $62,237 in
1996, net loss of $62,125 in 1995 and net loss of $22,478 in
1994. The increase in net income in 1996 can be attributed to an
increase in rental income, a decline in interest expense and a
lower provision for doubtful accounts in 1996. Interest expense
decreased $72,644 to $144,185 in 1996 from $216,829 in 1995 as a
result of a paydown of long-term debt related to that shopping
center in the fourth quarter of 1995. The provision for doubtful
accounts was lower by $35,777 in 1996 in comparison to 1995
primarily as a result of the receivables related to three tenants
which were included in the provision in 1995 and
<PAGE> 34
either written off or partially collected in 1996. The increase
in net loss in 1995 can primarily be attributed to a decline in
total rental and tenant reimbursement income and an increase in
repairs and maintenance expense.
Rental income decreased approximately 7% to $498,900 in 1996 from
$467,588 in 1995. Rental income was $485,623 in 1994. The
increase in rental income in 1996 can be attributed to changes in
occupancy. The decrease in rental income in 1995 is primarily
attributable to changes in occupancy and the sale of a pad site
in 1995. As of December 31, 1996, Berkeley Square was
approximately 97% leased, an increase from approximately 95%
leased as of December 31, 1995. Berkeley Square was 83% leased
at December 31, 1994. The 12% increase in the center's leased
percentage from 1994 to 1995 primarily resulted from the addition
of three tenants leasing an aggregate of 13,456 square feet.
Quality Center: Net loss decreased to $90,017 in 1996 from
$282,291 in 1995. Net loss was $36,032 in 1994. The decrease in
net loss in 1996 can be attributed to an increase in rental and
tenant reimbursement income. The increase in net loss in 1995
can be attributed to a decline in rental income and an increase
in administrative expense. Administrative expense increased
$63,472 to $73,622 in 1995 from $10,150 in 1994 primarily due to
an adjustment in the marketing fund as a result of a decline in
tenant contributions for this period and prior periods based on
occupancy at the property.
Rental income decreased approximately 29% to $586,957 in 1996 from
$455,963 in 1995. Rental income was $622,337 in 1994. As of December
31, 1996, Quality Center was approximately 73% leased, an increase
from approximately 70% leased as of December 31, 1995. Quality Center
was 59% leased at December 31, 1994. The changes in rental income in
1996 and 1995 were primarily attributable to changes in occupancy.
Two tenants paying aggregate annual rents of $121,833 vacated Quality
Center in December 1994. A competing shopping center located one mile
west of Quality Center re-opened, after extensive renovations, in
April 1993. A second shopping center competing with Quality Center,
Rockvale Square, added approximately 125,000 square feet of retail
outlet space in 1993 and 1994. Rockvale Square is located directly
across U.S. Route 30 from Quality Center.
<PAGE> 35
ITEM 8. FINANCIAL STATMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Financial Statement Schedules
Page
Report of Independent Public Accountants......................36
Financial Statements:
Balance Sheets..............................................37
Statements of Operations....................................38
Statements of Partners' Equity..............................39
Statements of Cash Flows....................................40
Notes to Financial Statements...............................41
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Account............51
Schedule III - Real Estate and Accumulated Depreciation
and Notes to Schedule.......................52
Schedule IV - Mortgage Loans on Real Estate and Notes to
Schedule....................................55
All other schedules are omitted since they are not required, are
not applicable, or the financial information required is included
in the financial statements or the notes thereto.
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Mid-Atlantic Centers Limited Partnership:
We have audited the accompanying balance sheets of MID-ATLANTIC
CENTERS LIMITED PARTNERSHIP (a Maryland limited partnership) as
of December 31, 1996 and 1995, and the related statements of
operations, partners' equity and cash flows for each of the three
years in the period ended December 31, 1996. These financial
statements and the schedules referred to below are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Mid-Atlantic Centers Limited Partnership as of December 31,
1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules
listed in the index to financial statements are presented for
purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state, in all material respects, the
financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN L.L.P.
Baltimore, Maryland
February 10, 1997
<PAGE> 37
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
Investment in real estate held for lease, at cost:
Land $ 8,724,880 $ 9,124,457
Buildings and improvements 42,599,014 43,934,858
----------- -----------
51,323,894 53,059,315
Less - accumulated depreciation (16,939,873) (13,271,409)
----------- -----------
34,384,021 39,787,906
Cash and cash equivalents 3,051,221 1,664,994
Tenant accounts receivable, net of allowance for
doubtful accounts ($228,991 in 1996 and
$326,673 in 1995) 767,223 791,031
Escrows 882,333 842,307
Prepaid expenses and other assets 360,030 255,880
Intangible assets, net of accumulated amortization
($1,035,330 in 1996 and $935,235 in 1995) 222,287 222,427
----------- -----------
Total assets $39,667,115 $43,564,545
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including current maturities $28,104,113 $29,130,611
Interest payable 1,098,751 683,682
Cash flow protector loans 789,203 789,203
Accounts payable and accrued expenses 124,800 211,208
Prepaid rents and security deposits 193,139 203,141
Due to related parties 126,780 90,903
----------- -----------
Total liabilities 30,436,786 31,108,748
----------- -----------
General partners and assignor limited partner 529,870 501,599
Assignee limited partners (1,200,000 units
authorized, issued and outstanding) 8,700,459 11,954,198
----------- -----------
Total partners' equity 9,230,329 12,455,797
----------- -----------
Total liabilities and partners' equity $39,667,115 $43,564,545
=========== ===========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE> 38
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income:
Rental income $5,404,431 $6,288,608 $6,537,318
Tenant reimbursement income 1,072,243 1,137,461 1,370,417
----------- ----------- -----------
Total income 6,476,674 7,426,069 7,907,735
----------- ----------- -----------
Operating expenses:
Interest expense 2,759,025 3,188,433 3,177,157
Write-down of assets 2,895,000 2,606,156 1,587,746
Depreciation 1,383,271 1,598,697 1,685,458
Repairs and maintenance 920,829 880,272 880,552
Real estate taxes 612,334 681,870 667,371
Management and leasing to related parties 386,327 428,756 456,981
Insurance 143,694 156,783 166,693
Amortization 111,445 92,110 143,540
Provision for doubtful accounts 73,599 172,159 194,554
Other expenses 691,931 933,930 675,601
----------- ----------- -----------
Total operating expenses 9,977,455 10,739,166 9,635,653
----------- ----------- -----------
Loss from rental operations (3,500,781) (3,313,097) (1,727,918)
Other income (loss):
Gain on sale of pad sites 241,290 171,877 -
Loss on sale of shopping centers (78,687) (2,271,249) -
Interest income 112,710 31,102 10,761
----------- ----------- -----------
Net loss before extraordinary item (3,225,468) (5,381,367) (1,717,157)
Extraordinary gain related to
forgiveness of debt - 1,602,902 -
----------- ----------- -----------
Net loss $(3,225,468) $(3,778,465) $(1,717,157)
=========== =========== ===========
Net gain (loss) allocated to
general partners $ 28,271 $ 510,675 $ (17,172)
=========== =========== ===========
Net loss allocated to assignee
limited partners $(3,253,739) $(4,289,140) $(1,699,985)
=========== =========== ===========
Net loss allocated to assignee limited
partners per unit: (1,200,000 units
issued and outstanding)
Net loss before extraordinary item $ (2.71) $ (4.57) $ (1.42)
Extraordinary gain - 1.00 -
Net loss -------- ------- -------
$ (2.71) $ (3.57) $ (1.42)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 39
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' EQUITY
for the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Assignee Assignor Total
General Limited Limited Partners'
Partners Partners Partner Equity
--------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Partners' equity, December 31, 1993 $ 8,019 $17,943,323 $ 77 $17,951,419
Net loss (17,172) (1,699,985) - (1,717,157)
--------- ----------- -------- -----------
Partners' equity, December 31, 1994 (9,153) 16,243,338 77 16,234,262
Net loss 510,675 (4,289,140) - (3,778,465)
--------- ----------- -------- -----------
Partners' equity, December 31, 1995 501,522 11,954,198 77 12,455,797
Net loss 28,271 (3,253,739) - (3,225,468)
--------- ----------- -------- -----------
Partners' equity, December 31, 1996 $529,793 $ 8,700,459 $ 77 $ 9,230,329
========= =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 40
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(3,225,468)$(3,778,465)$(1,717,157)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,494,716 1,690,807 1,828,998
Write-down of assets 2,895,000 2,606,156 1,587,746
Forgiveness of debt - (1,602,902) -
Loss on sale of shopping centers 78,687 2,271,249 -
Gain on sale of pad sites (241,290) (171,877) -
Changes in operating assets and liabilities:
Decrease (increase) in tenant accounts
receivable, net 23,808 240,256 (296,552)
(Increase) decrease in prepaid expenses
and other assets, net (230,554) 14,004 49,988
(Decrease) increase in accounts payable
and accrued expenses (96,410) 112,368 (1,507,895)
Increase in interest payable, net of noncash
transactions of $29,558 in 1995 415,069 224,506 48,799
Increase (decrease) in due to related
parties 35,877 (27,260) 22,344
Total adjustments 4,374,903 5,357,307 1,733,428
Net cash provided by operating
activities 1,149,435 1,578,842 16,271
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements of real estate (108,447) (504,523) (275,186)
Proceeds from sale of real estate 1,675,636 5,294,826 -
Establishment of capital improvement
escrow - (289,617) -
Assigned certificate of deposit for
capital improvements - (11,550) -
Net cash provided by (used in)
investing activities 1,567,189 4,489,136 (275,186)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (643,988) (769,436) (781,393)
Retirement of long-term debt (382,510) (4,937,500) (1,102,392)
Mortgage escrow deposits, net (194,394) (130,000) (206,148)
Financing fees (109,505) (350,229) (86,488)
Proceeds from long-term debt - 1,400,000 2,640,940
Payment of deferred interest - - (150,000)
Assigned certificate of deposit to lender - - (25,000)
Net cash (used in) provided by
financing activities (1,330,397) (4,787,165) 289,519
Net increase in cash and cash equivalents 1,386,227 1,280,813 30,604
Cash and cash equivalents at beginning
of year 1,664,994 384,181 353,577
Cash and cash equivalents at end of year $ 3,051,221 $1,664,994 $ 384,181
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 41
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996
-------------------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Mid-Atlantic Centers Limited Partnership (the "Partnership") was
organized under the laws of the State of Maryland on December 16,
1986. The Partnership was formed to acquire, hold, lease and
ultimately sell income-producing community and neighborhood
shopping centers.
The following is a summary of the significant accounting policies
followed in the preparation of the Partnership's financial
statements.
LAND, BUILDINGS AND IMPROVEMENTS. The cost of land, buildings and
improvements are capitalized, while expenditures for maintenance and
repairs are charged to operations as incurred. Depreciation is
computed using the straight-line method based on the estimated useful
lives of the respective assets.
AMORTIZATION. Deferred financing costs are amortized over the term
of the respective mortgage loans using the straight-line method.
Deferred leasing commissions are amortized over the term of the
respective tenant leases using the straight-line method.
INCOME TAXES. No provision for or benefit from income taxes has
been included in these financial statements since taxable income or
loss passes through to, and is reportable by, the partners
individually.
RENTAL INCOME. Certain leases provide for either abatement of rents
or scheduled rent increases over the life of the lease. Rental income
is recorded on a straight-line basis of equal monthly payments over
the respective terms of such leases. The receivables related to the
recording of rental income on a straight-line basis totalled $317,688
and $313,259 at December 31, 1996 and 1995, respectively.
Certain leases provide for additional rent computed on the basis of
a percentage of gross sales in excess of specified levels. Rental
income for the years ended December 31, 1996, 1995 and 1994
included income with respect to these percentage rentals of
$292,698, $272,895 and $254,577, respectively.
STATEMENTS OF CASH FLOWS. For purposes of the statements of cash
flows, the Partnership considers cash in banks, commercial paper
and repurchase agreements with original maturities of less than
three months to be cash and cash equivalents.
RECLASSIFICATIONS. Certain amounts from the prior year financial
statements have been reclassified in order to conform with the
current year presentation.
USE OF ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
<PAGE> 42
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES: (continued)
FINANCIAL INSTRUMENTS. The carrying values of the Partnership's
cash and cash equivalents, tenant accounts receivable, accounts
payable, due to related parties and long-term debt approximate the
fair values. As the cash flow protector loans are non-interest
bearing and will only be paid after certain returns to assignee
limited partners, the fair value of the cash flow protector loans
are not readily determinable.
LONG-LIVED ASSETS. Effective January 1, 1996, the Partnership adopted
Statement of Financial Accounting Standards ("SFAS") No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of". SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used or
disposed of by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The adoption on January 1, 1996 had no effect
on the financial statements of the Partnership. Management reviews
the Partnership's assets for impairment on a property by property
basis at year end when the third party appraisals have been completed
and whenever circumstances occur which indicate that the carrying
amount of the assets may be impaired.
The Partnership considers its properties to be long-lived assets to
be held and used. The Partnership's policy is to classify its
assets as held for sale when the Partnership has formally committed
to dispose of the properties whether by sale or abandonment if
suitable offers are not received, and that it is unlikely that the
plan would be withdrawn.
Certain properties are listed for sale with brokers with the intent
that if acceptable offers are received, the Partnership would
consider selling the property or properties. In the meantime, the
Partnership will continue to operate the properties. To the extent
some properties are sold there may be losses recognized from the
sales because the net proceeds from the sale of certain properties
may be below the carrying values. The estimated future cash flows
from all properties are expected to be in excess of the carrying
values as of December 31, 1996. The carrying value of one
property, which is not listed for sale, is approximately $1,200,000
above its appraised value, however, the carrying value is below the
property's estimated future net cash flows. As such the property
is not considered impaired for SFAS No. 121 purposes.
NEW ACCOUNTING PRONOUNCEMENT. During 1997, the Financial
Accounting Standards Board issued SFAS No. 128, "Earnings Per
Share", which becomes effective December 31, 1997, and which early
adoption is not permitted. Under SFAS No. 128, a company would
disclose basic earnings per share (the principal difference being
that common share equivalent would not be considered in the
compilation of basic earnings per share) and diluted earnings per
share. Because this pronouncement was recently issued, the
Partnership has not completely determined the effect of adopting
this pronouncement, however, the effect of the adoption is not
expected to be material.
<PAGE> 43
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE B - PARTNERS' CAPITAL CONTRIBUTIONS:
The Partnership has two general partners -- Realty Capital IV Limited
Partnership and FW Realty Limited Partnership, and one assignor
limited partner -- LM Unit Trust, Inc. Each general partner and the
assignor limited partner have made capital contributions of $500 and
$100, respectively. Under the terms of the Partnership Agreement,
the general partners have no obligation to make additional capital
contributions to the Partnership, except under certain circumstances
upon liquidation.
The assignor limited partner has assigned all of its rights in
its limited partnership interests to the assignee limited
partners. Total assignee limited partners' contributions in
accordance with the Partnership Agreement were $29,997,125 (which
excludes volume purchase discounts of $2,875). Offering costs
of $2,802,312 were funded from such contributions.
NOTE C - RENTALS UNDER OPERATING LEASES:
The Partnership has leased space in its shopping center
properties under noncancellable operating leases. The following
table summarizes future minimum rental receipts due on
noncancellable operating leases as of December 31, 1996:
1997 $4,223,547
1998 3,428,260
1999 2,595,165
2000 2,050,870
2001 1,630,649
Thereafter 6,439,856
$20,368,347
These minimum future rentals do not include additional rent which
may be received from tenants for pass-through provisions in
leases related to increases in operating expenses and percentage
rentals.
<PAGE> 44
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE D - LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Mortgage loan due December 1, 2006
Interest at 8.5% $1,810,780 $1,832,675
Mortgage loan due February 10, 2000
Interest at 9.5% 6,220,016 6,320,814
Mortgage loan due December 21, 1997 (1)
Interest at 10.125% 3,136,332 3,177,097
Mortgage loan
Interest at 75% of prime rate - 257,922
Mortgage loan due June 1, 1998
Interest at prime rate plus 1.25%,
with a floor of 7.25%
(9.75% at December 31, 1996) 1,444,197 1,494,717
Mortgage loan due September 12, 1998
Interest at 10.5% 1,974,849 2,051,068
Mortgage loan due September 01, 2000
Interest at 8.625% 1,380,501 1,397,333
Mortgage loan due January 1, 1999
Interest at 8% 5,384,997 5,384,997
Mortgage loan due January 1, 1999
Interest at prime rate plus 1.5%,
with a floor of 7.5%
(10% at December 31, 1996) 1,674,940 1,923,940
Mortgage loan due December 31, 1997 (2)
Interest at 10.13% 1,385,065 1,454,215
Mortgage loan due February 1, 1998 (3)
Interest at 10.625% 3,692,436 3,835,833
$28,104,113 $29,130,611
</TABLE>
(1) - The Partnership currently anticipates the lender will agree
to renew this mortgage.
(2) - This mortgage loan has an extension option, exercisable by
the Partnership, to extend the term of such loan for one
year. The interest rate payable during the extension
period is adjusted to 2.75% over the one year U.S. Treasury
bill.
(3) - The Quality Center loan was scheduled to mature on February
1, 1997. The lender has agreed to extend the term of this
loan for one year, subject to the completion of the
required documentation.
The mortgage loans are non-recourse obligations secured by deeds
of trust on the related real estate held for lease and by
assignments of rents. Interest paid on these mortgages was
$2,343,956, $2,993,485, and $3,278,358 for the years ended
December 31, 1996, 1995 and 1994, respectively.
<PAGE> 45
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE D - LONG-TERM DEBT: (continued)
The general partners anticipate that the balloon or principal
balance payments required on the mortgage loans at maturity will
require an extension of the existing mortgage loan or sale or
refinancing of the property to which it relates at such time.
Maturities of long-term debt at December 31, 1996 are as follows:
1997 $5,527,446
1998 7,781,486
1999 878,570
2000 12,270,223
2001 50,564
Thereafter 1,595,824
$28,104,113
FORGIVENESS OF DEBT
On December 29, 1995, at the time of sale of Orchard Square
Shopping Center, the holder of the Orchard Square mortgage
accepted $3,900,000 in satisfaction of its mortgage, the
principal balance and accrued interest of which was $5,748,344
and $29,558, respectively. The mortgage was previously due and
payable on December 31, 1994. For financial reporting purposes,
the forgiveness of principal and accrued interest, net of
transaction expenses, was recorded as an extraordinary gain of
$1,602,902 in the fourth quarter of 1995.
NOTE E - RELATED PARTY TRANSACTIONS:
MANAGEMENT FEES
In accordance with the Partnership Agreement, management fees (at
the rate of 6% of gross leasing receipts) of $386,327, $428,756,
and $456,981 in 1996, 1995 and 1994, respectively, were expensed
for amounts due to First Washington Management, Inc., an
affiliate of FW Realty Limited Partnership, for services rendered
in connection with the leasing and operation of the shopping
centers. A portion of these fees were paid by First Washington
Management, Inc. to Legg Mason Realty Capital, Inc. in
consideration of its performance of certain administrative
services.
AMOUNTS DUE TO RELATED PARTIES
At December 31, 1996, $28,297 and $25,052 were payable to First
Washington Management, Inc. and Legg Mason Realty Capital, Inc.,
respectively, for management fees and reimbursement of operating
expenses. At December 31, 1995, $576 and $16,896 were payable to
First Washington Management, Inc. and Legg Mason Realty Capital,
Inc., respectively, for the aforementioned expenses.
<PAGE> 46
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE E - RELATED PARTY TRANSACTIONS: (continued)
The General Partners agreed to lend the Partnership, without
interest, up to 50% of the acquisition fees actually paid to them
at the time the loan was made in the event the annual cumulative
non-compounded return to assignee limited partners fell below 7%
of the allocable invested capital for the period from February 1,
1989 through January 31, 1992. In 1990, the General Partners
fulfilled their obligation under the cash flow protector
provisions. As of December 31, 1996 and 1995, cash flow
protector loans totalling $789,203 are payable to FW Realty
Limited Partnership in the amount of $599,794 and to Realty
Capital IV Limited Partnership in the amount of $189,409. The
loans are non-interest bearing and will be repaid from
distributable cash flow or sale or refinancing proceeds after the
payment of a preferred return equal to a 10% annual cumulative
non-compounded return on invested capital to assignee limited
partners.
In addition, acquisition fees totalling $73,431 were payable as
of December 31, 1996 and 1995 to FW Realty Limited Partnership in
the amount of $55,808 and to Realty Capital IV Limited
Partnership in the amount of $17,623.
OTHER
In 1996, 1995 and 1994, the Partnership paid or accrued
approximately $38,000, $25,000, and $20,000, respectively, to
First Washington Management, Inc. for legal and architectural
services related to the renovation, leasing, rent collections and
other matters of the shopping centers. The Partnership paid or
accrued approximately $75,000, $71,000, and $68,000, in 1996,
1995 and 1994, respectively, to Legg Mason Realty Capital, Inc.
for reimbursement of operating expenses.
In the fourth quarter of 1995, discussions between Realty Capital
IV Limited Partnership on behalf of the Partnership and a real
estate investment trust ("FWREIT") formed by affiliates of FW
Realty Limited Partnership were reopened regarding the possible
sale for cash of the Partnership's shopping centers to an
affiliate of FWREIT. In 1996, these discussions were deferred
while the possibility of selling certain of the Partnership's
shopping centers through third party brokers is explored. If a
sale or disposition of all of the Partnership's properties were
to occur, it would be followed by a distribution of net proceeds
to partners and liquidation of the Partnership.
<PAGE> 47
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE F - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS:
All profits and losses prior to the first date on which assignee
limited partners were admitted to the Partnership were allocated
99.9% to the general partners and .1% to the assignor limited
partner. Upon admission of the assignee limited partners, the
interest of the general partners was reduced to 1% and the
interest of the assignor limited partner was reduced to zero.
Distributable cash flow is defined in the Partnership Agreement
as the sum of all cash receipts from operations and the principal
amount of loans from the general partners less disbursements for
operating cash expenses. Cash receipts under the master
leaseback agreements are treated as operating receipts in
determining distributable cash flow.
Distributable cash flow is payable quarterly as follows:
1. 99% to the assignee limited partners and 1% to the general
partners until each assignee limited partner has received an
annual cumulative return equal to 10% of invested capital;
and
2. the balance is distributable 98% to the assignee limited
partners and 2% to the general partners.
Income and loss from operations for each fiscal year is allocated
as follows:
1. If there has been a distribution of distributable cash flow
during such fiscal year, net income from operations shall
be allocated to the assignee limited partners and general
partners in proportion to such distribution of
distributable cash flow.
2. If there has been no distribution of distributable cash
flow during such fiscal year, net income from operations
shall be allocated 99% to the assignee limited partners and
1% to the general partners.
3. Net loss from operations for each fiscal year shall be
allocated 99% to the assignee limited partners and 1% to
the general partners.
Sale or refinancing proceeds are distributed first to meet the
debts and obligations of the Partnership and to fund reserves for
contingent liabilities to the extent deemed reasonable by the
general partners and then to the assignee limited partners and
general partners in the order described in section 4.4 of the
Partnership Agreement.
Any gain from a sale or refinancing is allocated as follows:
1. To the assignee limited partners and general partners having
negative balances in their capital accounts, prior to
distribution of sale or refinancing proceeds, an amount of
such gain sufficient to increase their negative balances to
zero.
2. To each assignee limited partner and general partner who has
received or will receive a distribution out of the sale or
refinancing proceeds, the amount of and in proportion to the
<PAGE> 48
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE F - PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS:
(continued)
excess of such distribution over the positive balance in his
capital account, determined after any allocation of gain
from a sale or refinancing pursuant to (1) above; and
3. The balance, 75% to the assignee limited partners and 25% to
the general partners.
Any loss from a sale or refinancing shall be allocated 99% to the
assignee limited partners and 1% to the general partners.
NOTE G - SALES OF ASSETS
On May 3, 1996, the Partnership sold Holiday shopping center to
an unrelated third party for a price of $1,200,000. For
financial reporting purposes, the Partnership recorded a loss,
after transaction expenses, of $78,687 in May 1996. For federal
income tax purposes, the Partnership recorded a loss, after
transaction expenses, of approximately $728,000.
On August 6, 1996, the Partnership sold a pad site of
approximately 1.15 acres of land at Tarrytown Mall to an
unrelated third party for a price of $330,000. For financial
reporting purposes, the Partnership recorded a gain, after
transaction expenses, of $154,079 in August 1996. For federal
income tax purposes, the Partnership recorded a gain, after
transaction expenses, of approximately $105,000. The net
proceeds from the sale, after payment of transaction expenses, of
approximately $324,000 were placed in escrow with the first trust
lender to be used for one of the following three purposes: (i) to
fund tenant improvement work if a replacement tenant is found for
the Wholesale Depot space, (ii) to acquire an adjoining parcel of
land to enhance visibility and provide additional customer
parking at Tarrytown Mall or (iii) to reduce the principal amount
of the first trust loan.
On September 25, 1996, the Partnership sold a pad site at
Edgewood Plaza to an unrelated third party for a price of
approximately $220,000. For financial reporting purposes, the
Partnership recorded a gain, after transaction expenses, of
$75,903 in September 1996. For federal income tax purposes, the
Partnership recorded a gain, after transaction expenses, of
approximately $82,000. The pad site was not secured by the
Edgewood Plaza mortgage.
On October 7, 1996, the Partnership sold a parcel of excess land
at Jackson Heights shopping center to an unrelated third party
for $40,000. For financial reporting and federal income tax
purposes, the Partnership recorded a gain, after transaction
expenses, of $22,208 in 1996. The net proceeds of approximately
$35,000 were applied to reduce the mortgage on Jackson Heights.
On December 5, 1996, the Partnership sold a parcel of excess land
at Edgewood Plaza to an unrelated third party for a price of
$29,900. For financial reporting and federal income tax
purposes, the Partnership recorded a loss, after transaction
expenses, of $10,900 in 1996. The
<PAGE> 49
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE G - SALES OF ASSETS: (continued)
parcel of land was not secured by the Edgewood Plaza mortgage.
On December 29, 1995, the Partnership sold Orchard Square
shopping center to an unrelated third party for a contract price
of $5,250,000. At the time of sale, the holder of the Orchard
Square mortgage accepted $3,900,000 in satisfaction of its
mortgage, the principal balance and accrued interest of which
were $5,748,344 and $29,558, respectively. The mortgage on
Orchard Square was due and payable on demand. The Partnership
recorded the forgiveness of debt, net of transaction expenses, as
an extraordinary gain of $1,602,902 in the fourth quarter of
1995. For financial reporting purposes, the Partnership recorded
a loss, after transaction expenses, of $2,271,249 in the fourth
quarter of 1995 in connection with the sale of the Orchard Square
property. For federal income tax purposes, the Partnership
recorded a loss, after transaction expenses, of approximately
$2,404,000 in 1995.
On November 17, 1995, the Partnership completed the sale of a pad
site at its Berkeley Square property to an existing tenant. The
contract price was $217,000, of which $192,000 was applied to pay
down the principal balance of the mortgage debt on Berkeley
Square. A gain for financial reporting and federal income tax
purposes of approximately $172,000 was recorded in the fourth
quarter of 1995 in connection with this sale.
NOTE H - WRITE-DOWNS OF ASSETS
In the fourth quarter of 1996, the Partnership recorded an
impairment charge of $2,895,000 to write-down the carrying value
of Tarrytown Mall to its fair value of $4,500,000 as of December
1, 1996. In accordance with SFAS No. 121, the assets, which
include the land, building and improvements and intangibles
related to Tarrytown Mall, were determined to be impaired because
recent downward revisions in estimates indicated future net cash
flows would be insufficient to fully recover the carrying value
of this property. The revisions in estimates were received in
the fourth quarter of 1996, were not known before the fourth
quarter, and resulted in a lower valuation for Tarrytown Mall in
comparison to the prior year's valuation. Fair value was
determined by an independent appraisal based on an income
capitalization approach. The Partnership plans to continue to
operate Tarrytown Mall and considers the center to be an asset to
be held and used until an offer is received that is deemed
satisfactory by the Partnership regarding disposal of the
property with a capable buyer. Any plan is contingent upon the
outcome of discussions with that center's first trust mortgage
lender which the Partnership intends to initiate in the second
quarter of 1997 regarding the required principal payments on the
first trust mortgage. The payments are scheduled to increase
July 1, 1997. In January 1997, the Partnership initiated
discussions with Tarrytown Mall's second trust mortgage lender
regarding the disposition of that center. No definitive plan of
disposition has been adopted.
<PAGE> 50
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE H - WRITE-DOWNS OF ASSETS: (continued)
In the fourth quarter of 1995, the Partnership recorded a charge
of $2,606,156 to reflect the Partnership's revised estimate of
net realizable value of Tarrytown Mall based on the decline in
the appraisal value at that time to $6,100,000 which was below
the outstanding balance of the mortgage debt and accrued interest
on the property. The $2,606,156 represented the sum of the
difference of $2,542,295 between the net book value of Tarrytown
Mall's land, building and improvements and the balance of the
mortgage debt and accrued interest as of December 31, 1995, plus
the write-off of $63,861 in tenant rent receivables related to
the recording of rental income on a straight-line basis.
In the fourth quarter of 1994, the Partnership wrote down assets
totalling $1,587,746 related to Tarrytown Mall and Holiday
Shopping Center. The Partnership recorded a net charge of
$1,047,746 for the write-down of leasehold improvements related
to Wholesale Depot, a former anchor tenant which leased 79,066
square feet at Tarrytown Mall. The leasehold improvements which
were placed in service in December 1993 were incurred as a direct
result of specifications within the Partnership's lease with
Wholesale Depot. Wholesale Depot filed for reorganization under
the provisions of Chapter XI of the U.S. Bankruptcy Code in May
1994. Wholesale Depot vacated its space at Tarrytown Mall in
late June 1994 and rejected its lease on October 7, 1994.
The additional charge of $540,000 in 1994 represented an
adjustment to the carrying value of Holiday to the Partnership's
revised estimate of the center's net realizable value at that
time. This write-down reflected the Partnership's intention to
offer this property for sale in 1995. The $540,000 represented
the difference between Holiday's book value as of December 31,
1994 and estimated net realizable value from the sale of the
center and operating the center until the sale.
The treatment of these write-downs of assets does not affect cash
flow or taxable income (loss) of the Partnership.
<PAGE> 51
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
Notes to Financial Statements
-------------------------
NOTE I - FEDERAL TAXABLE NET LOSS:
A reconciliation of the financial statement net loss to the
federal taxable net loss for the years ended December 31, 1996,
1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Financial statement net loss ($3,225,468) ($3,778,465) ($1,717,157)
Adjustments:
-Write-down of assets for financial statements 2,895,000 2,606,156 1,587,746
-Loss on sale of assets (692,288) (132,709) -
-Costs depreciated over a life longer for income
tax purposes than financial reporting purposes 1,632 7,376 94,897
-Rent abatements and scheduled rent increases (4,429) 19,507 (28,059)
-Effects of rents collected in advance (14,008) (14,335) (20,162)
-Provision for doubtful accounts, net of write-offs (97,685) (26,835) (66,809)
-Other adjustments 51,665 (63,023) (11,179)
Federal taxable net loss ($1,085,581) ($1,382,328) ($160,723)
</TABLE>
Because many types of transactions are susceptible to varying
interpretations under federal and state income tax laws and
regulations, the amounts reported above may be subject to change
at a later date upon final determination by the taxing
authorities.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT
-------------------------
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
Allowance for doubtful tenant accounts receivable:
<S> <C> <C> <C>
Balance at beginning of year $326,673 $353,507 $420,316
Reserve charges to costs and expenses 73,599 172,159 194,554
Write-offs during the year (171,281) (198,993) (261,363)
Balance at end of year $228,991 $326,673 $353,507
</TABLE>
<PAGE> 52
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ------------------ ------------- ----------------------------- ----------------------------
Costs capitalized subsequent
Initial cost to Partnership to acquisition
Shopping Center/ Building & Carrying
Location Encumbrances Land Improvements Improvements Costs(1)
- ------------------ ------------- ------------ ---------------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Woodlawn Village
Fredericksburg, VA $1,810,780 $396,805 $2,298,000 $111,728 $ (129,537)
Lynnwood Place
Jackson, TN 6,220,016 1,271,305 7,809,446 218,605 (269,476)
Highlandtown Village
Baltimore, MD 3,136,332 1,048,889 4,414,076 85,004 (112,422)
Jackson Heights
Murfreesboro, TN 1,974,849 1,012,279 4,078,383 707,266 (8,536)
Cloister
Ephrata, PA 1,444,197 269,773 2,727,707 253,607 (35,000)
Edgewood Plaza
Harford County, MD 1,380,501 525,755 1,133,771 625,746 (188,478)
Berkeley Square
Goose Creek, SC 1,385,065 730,113 2,288,132 1,374,851 (40,733)
Tarrytown Mall
Rocky Mount, NC 7,059,937 2,360,955 6,476,200 5,295,869 (1,735,967)
Quality Center
Lancaster, PA 3,692,436 1,662,556 4,899,369 97,391 (329,538)
----------- ----------- ----------- ----------- ------------
TOTALS $28,104,113 $9,278,430 $36,125,084 $8,770,067 $(2,849,687)
=========== =========== =========== =========== ============
</TABLE>
<PAGE> 53
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued)
<TABLE>
<CAPTION>
Column A Column E Column F Column G Column H Col. I
- ------------------ ----------------------------------- -------- -------- -------- --------
Gross amount at which carried Accum- Depre-
at December 31, 1996 (2) ulated Date of ciable
Shopping Center/ Building & Depreci- Construc- Date Life
Location Land Improvements Totals(4) ation(3) tion Acquired (in yrs)
- ------------------ -------- --------------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Woodlawn Village
Fredericksburg, VA $407,558 $2,269,438 $2,676,996 $713,576 1986 12/31/86 31.5
Lynnwood Place
Jackson, TN 1,055,305 7,974,575 9,029,880 2,387,991 1986 07/16/87 31.5
Highlandtown Village
Baltimore, MD 1,048,888 4,386,659 5,435,547 1,295,715 1987 09/16/87 31.5
Jackson Heights
Murfreesboro, TN 1,003,743 4,785,649 5,789,392 1,343,609 1965 09/30/87 31.5
Cloister
Ephrata, PA 269,954 2,946,133 3,216,087 807,579 1961 12/30/87 31.5
Edgewood Plaza
Harford County, MD 462,369 1,634,425 2,096,794 327,711 1962 04/14/88 31.5
Berkeley Square
Goose Creek, SC 689,380 3,662,983 4,352,363 899,927 1967 10/03/88 31.5
Tarrytown Mall
Rocky Mount, NC 2,269,844 10,127,213 12,397,057 7,962,498 1963 09/01/88 31.5
Quality Center
Lancaster, PA 1,517,839 4,811,939 6,329,778 1,201,267 1987-88 01/31/89 31.5
----------- ----------- ----------- -----------
TOTALS $ 8,724,880 $42,599,014 $51,323,894 $16,939,873
=========== =========== =========== ===========
</TABLE>
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
--------------------------------------
NOTE 1. CARRYING COSTS ADJUSTMENTS:
For financial reporting purposes, payments received pursuant to
master leaseback agreements are treated as an adjustment to the
carrying value of the property. Column D - Carrying Costs also
includes adjustments to investments in real estate for sales of
property or portions thereof and write-downs of assets.
<PAGE> 54
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued)
-------------------------------------
NOTE 2. RECONCILIATION OF REAL ESTATE:
<TABLE>
<CAPTION
For the year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $53,059,315 $61,191,581 $62,585,715
Additions during year:
Improvements 387,419 504,523 275,186
Deductions during year:
Sale of shopping center property (1,669,179) (8,596,056) -
Sale of pad sites and land (453,661) (40,733) -
Write-down of assets - - (1,669,320)
(2,122,840) (8,636,789) (1,669,320)
Balance at end of year $51,323,894 $53,059,315 $61,191,581
</TABLE>
In 1994, the Partnership wrote down assets totalling $1,669,320
and accumulated depreciation of $81,574. The Partnership
recorded a net charge of $1,047,746 for the write-down of
leasehold improvements related to Wholesale Depot at Tarrytown
Mall. The Partnership recorded an additional charge of $540,000
to adjust the carrying value of Holiday to the Partnership's
revised estimate of the center's net realizable value as a result
of the expected sale of the center.
NOTE 3. RECONCILIATION OF ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
For the year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $13,271,409 $10,658,778 $9,054,894
Depreciation expense for the year 1,383,271 1,598,697 1,685,458
Write-down of assets 2,895,000 2,542,295 (81,574)
Sale of shopping center property (609,807) (1,528,361) -
Balance at end of year $16,939,873 $13,271,409 $10,658,778
</TABLE>
In the fourth quarter of 1996, the Partnership recorded an
impairment charge of $2,895,000 to write-down the carrying value
of Tarrytown Mall to its fair value of $4,500,000 as of December
1, 1996. In accordance with SFAS No. 121, the assets, which
include the land, building and improvements and intangibles
related to Tarrytown Mall, were determined to be impaired because
recent downward revisions in estimates indicated future net cash
flows would be insufficient to fully recover the carrying value
of this property.
In the fourth quarter of 1995, the Partnership recorded a charge
of $2,542,295 to reflect the Partnership's revised estimate of
net realizable value of Tarrytown Mall based on the decline in
the appraisal value. The $2,542,295 represented the sum of the
difference between the net book value of Tarrytown Mall's land,
building and improvements and the balance of the mortgage debt
and accrued interest as of December 31, 1995.
NOTE 4. FEDERAL INCOME TAX COST OF INVESTMENT IN REAL ESTATE:
The aggregate cost of land and buildings and improvements for
federal income tax purposes is $8,724,880 and $44,395,771,
respectively, for a total cost of $53,120,651 at December 31,
1996.
<PAGE> 55
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
Column A Column B Column C Column D
- ------------------------ ------------ ------------ ------------------------------------
Description of Final Periodic
Shopping Center Interest Maturity Payment
Mortgages/Location Rate Date Terms
- ------------------------ ------------ ------------ ------------------------------------
<S> <C> <C> <C>
First mortgage Level monthly payments of principal
on Woodlawn Village and interest with entire the
Fredericksburg, VA 8.5% 12/01/06 principal due at maturity
First mortgage Level monthly payments of principal
on Lynnwood Place and interest, with entire principal
Jackson, TN 9.5% 2/10/00 due at maturity
First mortgage Level monthly payments of principal
on Highlandtown Village and interest with
Baltimore, MD 10.125% 12/21/97 balloon due at maturity (2)
First mortgage
on Jackson Heights Level monthly payments of principal
Murfreesboro, TN 10.5% 9/12/98 and interest (3)
First mortgage Prime rate plus 1.25%, Fixed monthly principal payments
on Cloister with a floor of 7.25%, plus interest with balloon
Ephrata, PA 9.75% at 12/31/96 6/01/98 due at maturity
First mortgage 12/31/97,
on Berkeley Square with option to Level monthly payments of principal
Goose Creek, SC 10.13% (4) extend one year and interest (5)
First trust mortgage Prime rate plus 1.5%, Monthly payments of principal
on Tarrytown Mall with a floor of 7.5%, and interest with entire
Rocky Mount, NC 10% at 12/31/96 1/01/99 principal due at maturity
Monthly payments of net cash flow from
Second trust mortgage the property after payment of first
on Tarrytown Mall trust debt service, with principal and
Rocky Mount, NC 8.0% 1/01/99 accrued interest due at maturity
First mortgage
on Edgewood Plaza Level monthly payments of principal
Harford County, MD 8.625% 9/01/00 and interest
First mortgage
on Quality Center Level monthly payments of principal
Lancaster, PA 10.625% 2/01/98(6) and interest
</TABLE>
See notes attached.
<PAGE> 56
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - (Continued)
<TABLE>
<CAPTION>
Column A Column E Column F Column G Column H
- ------------------------ ---------- ------------ ------------ --------------------
Principal amount of
Description of Face Carrying loans subject to
Shopping Center Prior amount of amount of delinquent principal
Mortgages/Location Liens mortgages mortgages(1) or interest
- ------------------------ ---------- ------------ ------------ --------------------
<S> <C> <C> <C> <C>
First mortgage
on Woodlawn Village
Fredericksburg, VA None $1,950,000 $1,810,780 None
First mortgage
on Lynnwood Place
Jackson, TN None 6,600,000 6,220,016 None
First mortgage
on Highlandtown Village
Baltimore, MD None 3,275,000 3,136,332 None
First mortgage
on Jackson Heights
Murfreesboro, TN None 2,450,000 1,974,849 None
First mortgage
on Cloister
Ephrata, PA None 1,750,000 1,444,197 None
First mortgage
on Berkeley Square
Goose Creek, SC None 1,975,000 1,385,065 None
First trust mortgage
on Tarrytown Mall
Rocky Mount, NC None 2,640,940 1,674,940 None
Second trust mortgage
on Tarrytown Mall
Rocky Mount, NC None 6,500,000 5,384,997 None
First mortgage
on Edgewood Plaza
Harford County, MD None 1,400,000 1,380,501 None
First mortgage
on Quality Center
Lancaster, PA None 4,150,000 3,692,436 None
----------- -----------
Totals $32,690,940 $28,104,113
=========== ===========
</TABLE>
See notes attached.
<PAGE> 57
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
(1) See Note 1 attached.
(2) Prepayment penalty of the amount by which the loan rate
exceeds the yield on U.S. Treasury Notes with a maturity date
closest to the loan maturity date multiplied by the
outstanding principle balance due multiplied by the number of
years remaining in the original term. Minimum prepayment of
1% of prepayment unless total payoff is made during the final
60 days of the original loan term.
(3) Prepayment penalty of 1% of prepayment.
(4) The interest rate changes based on the three year treasury
constant maturity as published by the Federal Reserve, plus
2.75%.
(5) Prepayment penalty equal to the present value of the
difference between interest to be paid on the loan to
maturity (or the next Interest Change Date) and the interest
payments (less 1%) which would be paid on Treasury Securities
issued at the rate available on the prepayment date, with the
same principal and remaining maturity.
(6) The Quality Center loan was scheduled to mature on February
1, 1997. The lender has agreed to extend the term of this
loan for one year, subject to the completion of the required
documentation.
NOTE 1. RECONCILIATION OF MORTGAGE LOANS:
<TABLE>
<CAPTION>
For the years ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year $29,130,611 $35,285,891 $34,528,736
Additions during the year:
Proceeds from long-term debt - 1,400,000 2,640,940
- 1,400,000 2,640,940
Deductions during the year:
Principal payments on long-term debt 643,988 769,436 781,393
Retirement of long-term debt 382,510 4,937,500 1,102,392
Forgiveness of debt, before
transaction and other costs
of $245,442 - 1,848,344 -
1,026,498 7,555,280 1,883,785
Balance at end of year (a) $28,104,113 $29,130,611 $35,285,891
(a) The carrying amount of mortgages for federal income tax
purposes was $28,104,113 at December 31, 1996.
<PAGE> 58
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Identification of Directors and Executive Officers
The Partnership does not have officers or directors. The General
Partners of the Partnership are FW Realty Limited Partnership and
Realty Capital IV Limited Partnership. The following tables set
forth the names, ages and positions held by the directors and
executive officers of FW Corporation and LMRC IV, Inc., the
respective general partners of the General Partners.
</TABLE>
<TABLE>
<CAPTION>
Relationship to
Positions Held With FW Realty
Name FW Corporation Age Limited Partnership
<S> <C> <C> <C>
William J. Wolfe President and Director 44 Limited Partner
Marvin Fabrikant Vice President and Director 52 Limited Partner
Stuart D. Halpert Secretary and Director 54 Limited Partner
Lester Zimmerman Treasurer and Director 47 Limited Partner
Jack E. Spector Director 47 Limited Partner
</TABLE>
<TABLE>
<CAPTION>
Relationship to
Positions Held With Realty Capital IV
Name LMRC IV, Inc. Age Limited Partnership
<S> <C> <C> <C>
Richard J. Himelfarb President and Director 55 none
Gerard F. Petrik, Jr. Vice President and
Director 38 none
L. Kay Strohecker Treasurer 41 none
C. Gregory Kallmyer Secretary 46 none
Robert Kleinpaste Director 50 none
</TABLE>
All of the FW Corporation individuals have served in the
capacities indicated above since 1987 (with the exception of Mr.
Wolfe who served as Vice President until March 31, 1995 when at
that time he became President). The LMRC IV, Inc. individuals
have served in the capacities indicated above since 1990 (with
the exception of Gerard F. Petrik, Jr. and L. Kay Strohecker who
were elected to their respective positions in June 1995). All of
the directors and executive officers will continue to serve in
their current capacities until their successors are elected and
qualified.
The following discussion provides certain information regarding
the principal employment and business experience of the executive
officers and directors of the General Partners.
Officers and Directors of FW Corporation
William J. Wolfe is President of FW Corporation, having assumed
that office on March 31, 1995. He has served as a director of FW
Corporation since 1987 and was a Vice President of that
<PAGE> 59
company from 1987 until becoming its President. Mr. Wolfe is
President, Chief Executive Officer and a director of First
Washington Realty Trust, Inc., a publicly held real estate
investment trust formed in 1994. He is also President, Chief
Executive Officer and a director of First Washington Management,
Inc. Mr. Wolfe is responsible for the day to day operations of
the companies and the leasing of First Washington Realty Trust,
Inc. and First Washington Management, Inc. properties. He has
concentrated on the leasing of newly constructed shopping centers
as well as renovations and expansions. Mr. Wolfe was President
of JNC Enterprises, a diversified real estate development
company, from 1979 until December 1983 when he co-founded First
Washington Development Group, Inc. Mr. Wolfe is a member of the
International Council of Shopping Centers.
Marvin Fabrikant is Vice President and a director of FW
Corporation. Mr. Fabrikant retired from active participation in
the operations of FW Corporation in 1991. Prior to joining First
Washington Development Group, Inc. in June 1984, Mr. Fabrikant
was engaged from 1979 to 1984 in commercial real estate
acquisition and development with Fabrikant and Kain, a real
estate development firm.
Stuart D. Halpert is Secretary and a director of FW Corporation
and Chairman of First Washington Management, Inc. He is Chairman
of First Washington Realty Trust, Inc., a publicly held real
estate investment trust formed in 1994. Mr. Halpert is involved
in the day to day operations of the companies and in project
analysis, selection and financing. From 1982 until joining First
Washington in June 1984, Mr. Halpert was a practicing attorney
with a major Washington, D.C. law firm. Prior to entering the
private practice of law, Mr. Halpert served as Counsel to the
House Committee on Banking and Currency, United States Congress.
Mr. Halpert is a member of the International Council of Shopping
Centers.
Lester Zimmerman is Treasurer and a director of FW Corporation
and Vice President of First Washington Management, Inc. He is
Executive Vice President and a director of First Washington
Realty Trust, Inc., a publicly held real estate investment trust
formed in 1994. Mr. Zimmerman specializes in market analysis,
project selection and sales. He is a licensed real estate broker
and has had experience in commercial brokerage, specializing in
the sale of major office and apartment projects. Mr. Zimmerman
also serves as President and a director of First Capital Realty,
Inc., an affiliated entity. Mr. Zimmerman was a real estate
broker with Carey Winston, a commercial real estate brokerage
company, from 1978 to 1981, and from 1981 until joining First
Washington in 1984 was employed as an independent real estate
broker.
Jack E. Spector is a director of FW Corporation, having served as
a director since 1987. From 1987 to March 31, 1995, he was the
President of FW Corporation. Mr. Spector was Executive Vice
President of First Washington Management, Inc. from 1984 until
March 31, 1995 when he resigned to become a business and real
estate consultant. He was Executive Vice President of First
Washington Realty Trust, Inc., a publicly held real estate
investment trust formed in 1994 until March 1995. Mr. Spector is
a Certified Public Accountant and prior to joining First
Washington Management, Inc., he was associated with Grant
Thornton, a national accounting firm. Mr. Spector is a member of
the American Institute of Certified Public Accountants.
<PAGE> 60
Officers and Directors of LMRC IV, Inc. and LM Unit Trust, Inc.
Richard J. Himelfarb is President and a director of LMRC IV, Inc.
and Legg Mason Realty Capital, Inc. He is a Senior Executive
Vice President and a director of Legg Mason, Inc. and Legg Mason
Wood Walker, Inc. Mr. Himelfarb has senior management
responsibility for the Corporate Finance, Real Estate Finance and
Direct Investments Departments of Legg Mason Wood Walker, Inc.
From 1972 until he joined Legg Mason, Inc. in 1983, Mr. Himelfarb
was a partner in a major Baltimore law firm, where he served as
senior outside counsel for Legg Mason, Inc. He is a graduate of
the Johns Hopkins University and the Yale Law School.
Gerard F. Petrik, Jr. is Vice President and a director of LMRC
IV, Inc. and Legg Mason Realty Capital, Inc. He is a Vice
President of Legg Mason Wood Walker, Inc. Mr. Petrik joined Legg
Mason in April 1987 and serves as manager of the Direct
Investments Department. Prior to his employment at Legg Mason,
Mr. Petrik was a senior associate at Paine Webber Properties,
Inc. Mr. Petrik received his undergraduate and graduate degrees
from Loyola College.
L. Kay Strohecker is Treasurer of LMRC IV, Inc. She is Assistant
Vice President of Legg Mason Wood Walker, Inc. Ms. Strohecker
joined Legg Mason in 1988 and serves as a senior analyst and
assistant to the Chief Financial Officer of Legg Mason, Inc..
Prior to joining Legg Mason, Ms. Strohecker was controller for a
private corporation in Baltimore. Ms. Strohecker is a graduate
of the University of Baltimore and is a Certified Public
Accountant.
C. Gregory Kallmyer is Secretary of LMRC IV, Inc. He is Vice
President of Legg Mason Wood Walker, Inc. Mr. Kallmyer joined
Legg Mason in October 1985 and serves as the assistant to the
Director of Compliance. Prior to his employment at Legg Mason,
Mr. Kallmyer was Vice President, Secretary and Director of Legal
Affairs at Union Trust Bancorp. Mr. Kallmyer is a graduate of
Mt. St. Mary's College and the University of Baltimore School of
Law.
Robert Kleinpaste is a director of LMRC IV, Inc. He is President
of Regency Homes Corporation, an Annapolis, Maryland based home
builder. From 1990 until 1994, he was President of Legg Mason
Realty Group, Inc. which is the real estate consulting and
appraisal subsidiary of Legg Mason, Inc. Prior to joining Legg
Mason Realty Group, Inc. as a Vice President in 1986, he was
President and founder of Real Property Research Group, Inc. That
firm was acquired by Legg Mason, Inc. in December 1986. Before
founding Real Property Research Group, Inc. in 1978, Mr.
Kleinpaste was Vice President of Marketing for Chesapeake Homes,
Inc. and prior to that served as Executive Vice President of
Briggs Napier Consultants, Inc., a real estate marketing
consulting firm. He is a graduate of the University of Maryland.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership is a limited partnership and therefore has no
directors or executive officers.
The General Partners and their affiliates are entitled to receive
various fees, distributions of distributable cash flow and sale
or refinancing proceeds and allocations of net income and net
loss
<PAGE> 61
from operations and gain or loss from a sale or refinancing from
the Partnership. Pages 10-14 of the Prospectus under the caption
MANAGEMENT COMPENSATION describe the manner in which fees are to
be paid, and pages 59-62 of the Prospectus under the caption
PARTNERSHIP DISTRIBUTIONS AND ALLOCATIONS describe the manner in
which cash distributions are to be made to the General Partners
and their Affiliates. These sections of the Prospectus are
incorporated by reference herein.
A description of the amounts, and sources of payment of, the fees
and other compensation paid or accrued by the Partnership to the
General Partners and their affiliates for the fiscal year ended
December 31, 1996 is included in Note E of Notes to Financial
Statements incorporated by reference from Item 8. Financial
statements and Supplementary Data herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of March
1, 1997, with respect to the beneficial ownership of the Units by
individuals who are officers and/or directors of the corporate
general partners of the General Partners:
Number of Percent of
Name Units Class
Richard J. Himelfarb 80 (1)
Legg Mason Tower
111 South Calvert Street
Baltimore, Maryland 21202
Jack E. Spector 200 (2) (1)
c/o First Washington Management, Inc.
4350 East-West Highway
Bethesda, Maryland 20814
All executive officers and
directors as a group 280 (1)
(1) Indicates less than 1%.
(2) Mr. Spector disclaims direct beneficial ownership of these
Units owned by his wife as custodian for their minor child.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions With Management and Others
The Partnership is a limited partnership and therefore has no
directors or officers. The Partnership has engaged in no
transactions with individual officers or directors of FW
Corporation or LMRC IV, Inc., the General Partners of the
Partnership. Those officers and directors may have indirect
interests in amounts paid to the General Partners and their
affiliates for services rendered by them to
<PAGE> 62
the Partnership. A description of the amounts of and sources of
payment of the fees and other compensation paid or accrued by the
Partnership to the General Partners and their affiliates for the
fiscal year ended December 31, 1996 is incorporated by reference
from Item 11. Executive Compensation herein.
During late 1993 and into 1994, affiliates of Realty Capital IV
Limited Partnership discussed the possible sale of the
Partnership's shopping centers to a limited partnership, of which
a real estate investment trust ("FWREIT") formed by affiliates of
FW Realty Limited Partnership serves as the sole general partner.
These discussions were discontinued without reaching agreement as
the stock market valuations of real estate investment trusts
owning strip and neighborhood shopping centers fell and the
Partnership's portfolio faced significant issues potentially
affecting values at Tarrytown Mall, Quality Center and Orchard
Square.
In the fourth quarter of 1995, discussions between Realty Capital
IV Limited Partnership on behalf of the Partnership and FWREIT
were reopened regarding the possible sale for cash of the
Partnership's shopping centers to an affiliate of FWREIT. In
1996, these discussions were deferred while the possibility of
selling certain of the Partnership's shopping centers through
third party brokers is explored.
(b) Certain Business Relationships
The Partnership has entered into certain arrangements with the
General Partners and their affiliates whereby they will receive
fees, commissions, compensation and other income from
transactions that have not and will not be determined on the
basis of arms-length negotiations. The Partnership Agreement
generally requires the terms of such transactions to be no less
favorable to the Partnership than the terms obtainable from
nonaffiliated entities rendering similar services on an ongoing
basis in the same geographic region. The types of business
transactions and the amounts payable in connection therewith are
described on pages 10-14 of the Prospectus under the caption
Management Compensation, pages 14-17 of the Prospectus under the
caption Conflicts of Interest, pages 24-26 of the Prospectus
under the caption Management, and pages 37-39 of the Prospectus
under the caption Investment Objectives and Policies. These
sections of the Prospectus are incorporated by reference herein.
A description of the amounts paid to the General Partners or
their affiliates during the fiscal year ended December 31, 1996
are set forth in Note E of the Notes to Financial Statements
incorporated by reference from Item 8. Financial Statements and
Supplementary Data herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
(1) See Index to Financial Statements and Financial Statement
Schedules on Page 35.
<PAGE> 63
<TABLE>
(2)Exhibits
<S> <C>
3.1 Third Amended and Restated Agreement and Certificate of Limited
Partnership. (1)
3.2 Third Certificate of Amendment to Third Amended and Restated Agreement
and Certificate of Limited Partnership. (3)
3.3 Second Certificate of Amendment to Third Amended and Restated Agreement
and Certificate of Limited Partnership. (3)
3.4 First Certificate of Amendment to Third Amended and Restated Agreement
and Certificate of Limited Partnership. (3)
4.1 Third Amended and Restated Agreement and Certificate of Limited
Partnership. (1)
4 The Partnership hereby agrees, pursuant to Item 601(b)(4)(iii)(A) of
Regulation S-K, to furnish to the Commission upon request a copy of
each instrument with respect to the rights of holders of the Edgewood
Plaza long-term debt of the Partnership. (10)
10.1 Form of Shopping Center Management and Leasing Agreement. (2)
10.2 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Food Lion, Inc. (3)
10.3 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Revco Drug Centers of Virginia Inc. (3)
10.4 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Kroger Company. (3)
10.5 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Santoni's Markets Incorporated. (3)
10.6 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Rite-Aid of Maryland, Inc. (3)
10.7 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Family Dollar Stores of Martinsville, Virginia, Inc. (3)
10.8 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Southeastern Outdoorsman, Inc. (3)
10.9 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Noland Company, Inc. (3)
10.10 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Grand Union Company. (3)
10.11 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
The Reed Company. (3)
10.12 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Family Dollar Stores of Pennsylvania, Inc. (3)
10.13 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
R.H. Properties Co. D/B/A New Ephrata Farmer's Market. (3)
10.14 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Santoni's, Inc. (3)
10.15 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
People's Service Drug Stores, Inc. (3)
10.16 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Montgomery Ward Co., Inc. (3)
10.17 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
S.E. Nichols, Inc. (3)
10.18 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Robert E. Lawlar. (3)
10.19 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Ottis T. Cato D/B/A Bingo Time. (3)
10.20 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Housewares Merchandisers, Inc. (3)
<PAGE> 64
10.21 First Addendum to that certain contract between First Washington
Development Group, Inc. and BPT Lynnwood Place Associates, LTD. dated
March 11, 1987. (3)
10.22 Escrow Agreement between BPT Lynnwood Place Associates, Ltd. and Mid-
Atlantic Centers Limited Partnership (pursuant to First Addendum to
the Contract) dated July 16, 1987. (3)
10.23 Lease Guarantee Agreement between Mid-Atlantic Centers Limited
Partnership and The Mitchell Company dated December 30, 1987. (3)
10.24 Escrow Agreement between The Mitchell Company, Mid-Atlantic Center
Limited Partnership and Mid-South Title Insurance Corporation dated
December 30, 1987. (3)
10.25 First Amendment of Real Estate Purchase Contract between First
Washington Development Group, Inc. and Five Shopping Center Co. dated
December 7, 1987. (3)
10.26 First Addendum to Real Estate Purchase Contract between Quality
Centers/Lancaster Limited Partnership and First Washington Development
Group, Inc. dated September 13, 1988. (3)
10.27 Escrow Agreement between Fidelity Title & Guaranty Company, Quality
Centers/Lancaster Limited Partnership and Mid-Atlantic Centers Limited
Partnership dated January 31, 1989. (3)
10.28 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Southeastern Health Spa, Inc. (4)
10.29 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Frensleys, Inc. (4)
10.30 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Nike Retail Services, Inc. (4)
10.31 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Wanda Fay Toney and T.A. Coats, Jr. (5)
10.32 Lease Agreement between Mid-Atlantic Centers Limited Partnership and
Video Vibes.(6)
10.33 Modification of Promissory Note and Statement of Loan Status between
Mid-Atlantic Centers Limited Partnership and The Mitchell Company. (7)
10.34 Supplemental agreement by and between Mid-Atlantic Centers Limited
Partnership and Montgomery Ward & Co., Incorporated amending lease
agreement included as Exhibit 10.16 of Form 10-K for the year ended
December 31, 1988. (7)
10.35 Lease agreement by and between Mid-Atlantic Centers Limited
Partnership and Wholesale Depot Holding Company, Inc. (7)
10.36 Amended and Restated Nonrecourse Purchase Money Promissory Note dated
January 13, 1994. (8)
10.37 Amendment to Note, Deed of Trust and Other Loan Documents dated
January 13, 1994. (8)
10.38 Promissory Note ($196,710.00) dated January 13, 1994. (8)
10.39 Loan Agreement between Mid-Atlantic Centers and FirstTrust Bank dated
January 13, 1994. (8)
10.40 Promissory Note between Mid-Atlantic Centers and FirstTrust Bank dated
January 13, 1994. (8)
10.41 Lease agreement by and between Mid-Atlantic Centers Limited
Partnership and W.S. Badcock Corporation dated November 10, 1993. (8)
10.42 Purchase and Sale Agreement between Mid-Atlantic Centers Limited
Partnership, RRC Acquisitions, Inc. and Ulmer, Murchison, Ashby and
Taylor dated December 29, 1995. (10)
27.1 Financial Data Schedule.
28.1 Letter of Valuation for 11 Shopping Center Properties as of January 1,
1993. (6)
28.2 Pages 10-14 of the Registrant's Prospectus dated March 25, 1987. (1)
28.3 Pages 14-17 of the Registrant's Prospectus dated March 25, 1987. (1)
28.4 Pages 24-26 of the Registrant's Prospectus dated March 25, 1987. (1)
28.5 Pages 37-39 of the Registrant's Prospectus dated March 25, 1987. (1)
<PAGE> 65
28.6 Pages 59-62 of the Registrant's Prospectus dated March 25, 1987. (1)
28.7 Page 66 of the Registrant's Prospectus dated March 25, 1987. (1)
28.8 Letter of Valuation for 11 Shopping Center Properties as of January 1,
1994. (8)
28.9 Letter of Valuation for 11 Shopping Center Properties as of November
30, 1994. (9)
28.10 Letter of Valuation for Ten Shopping Center Properties as of January
1, 1996. (10)
28.11 Letter of Valuation for Nine Shopping Center Properties as of December
1, 1996.
</TABLE>
(1) Incorporated by reference to the Registrant's Registration
Statement on Form S-11 under the Securities Act of 1933 (File
No. 33-11086).
(2) Incorporated by reference to Amendment No. 3 to the
Registrant's Registration Statement on Form S-11 under the
Securities Act of 1933 (File No. 33-11086).
(3) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1988
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(4) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(5) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(6) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(7) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1993 pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (File No. 0-16285).
(8) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(9) Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(10)Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995
pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (File No. 0-16285).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the
quarter ended December 31, 1996.
<PAGE> 66
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: Realty Capital IV Limited Partnership,
General Partner
By: LMRC IV, Inc., General Partner
/s/ Richard J. Himelfarb
Richard J. Himelfarb, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Title
Signature (Position held with LMRC IV, Inc.) Date
President and Director
/s/ Richard J. Himelfarb (Principal Executive Officer) March 27, 1997
Richard J. Himelfarb
Vice President and
/s/ Gerard F. Petrik, Jr. Director March 27, 1997
Gerard F. Petrik, Jr.
Treasurer (Principal Financial
/s/ L. Kay Strohecker and Accounting Officer) March 27, 1997
L. Kay Strohecker
/s/ Robert T. Kleinpaste Director March 27, 1997
Robert T. Kleinpaste
<PAGE> 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
MID-ATLANTIC CENTERS LIMITED PARTNERSHIP
By: FW Realty Limited Partnership,
General Partner
By: FW Corporation, General Partner
/s/ William J. Wolfe
William J. Wolfe, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Title
Signature (Position held with FW Corporation) Date
President and Director
/s/William J. Wolfe (Principal Executive Officer) March 27, 1997
William J. Wolfe
/s/ Marvin Fabrikant Vice President and Director March 27, 1997
Marvin Fabrikant
/s/ Stuart D. Halpert Secretary and Director March 27, 1997
Stuart D. Halpert
/s/ Lester Zimmerman Treasurer and Director March 27, 1997
Lester Zimmerman
/s/ Jack E. Spector Director March 27, 1997
Jack E. Spector
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> $3,051,221
<SECURITIES> $0
<RECEIVABLES> $996,214
<ALLOWANCES> $228,991
<INVENTORY> $0
<CURRENT-ASSETS> $0
<PP&E> $51,323,894
<DEPRECIATION> $16,939,873
<TOTAL-ASSETS> $39,667,115
<CURRENT-LIABILITIES> $0
<BONDS> $28,104,113
$0
$0
<COMMON> $0
<OTHER-SE> $9,230,329
<TOTAL-LIABILITY-AND-EQUITY> $39,667,115
<SALES> $0
<TOTAL-REVENUES> $6,476,674
<CGS> $0
<TOTAL-COSTS> $7,033,386
<OTHER-EXPENSES> $0
<LOSS-PROVISION> $73,599
<INTEREST-EXPENSE> $2,759,025
<INCOME-PRETAX> ($3,225,468)
<INCOME-TAX> $0
<INCOME-CONTINUING> ($3,225,468)
<DISCONTINUED> $0
<EXTRAORDINARY> $0
<CHANGES> $0
<NET-INCOME> ($3,225,468)
<EPS-PRIMARY> ($2.71)
<EPS-DILUTED> ($2.71)
</TABLE>
<PAGE> COVER
LETTER OF VALUATION
Nine (9) Shopping Centers
Mid Atlantic Centers Limited Partnership
As of
December 1, 1996
Prepared For:
Mid-Atlantic Centers Limited Partnership
c/o Realty Capital IV Limited Partnership
111 South Calvert Street, 17th Floor
Baltimore, Maryland 21203-1476
Mid-Atlantic Centers Limited Partnership
c/o FW Realty Limited Partnership
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
Submitted by:
Sapperstein & Associates
6917 Arlington Road
Suite 300
Bethesda, Maryland 20814
File No. 970114DG
<PAGE> 1
January 14, 1997
Mid-Atlantic Centers Limited Partnership
c/o Realty Capital IV Limited Partnership
111 South Calvert Street, 17th Floor
Baltimore, Maryland 21203-1476
Mid-Atlantic Centers Limited Partnership
c/o FW Realty Limited Partnership
4350 East-West Highway
Suite 400
Bethesda, Maryland 20814
Subject: Letter of Valuation for Nine (9) Shopping Centers
To: Mid-Atlantic Centers Limited Partnership
Realty Capital IV Limited Partnership
FW Realty Limited Partnership
Pursuant to your request and our letter of engagement,
please be advised that we have prepared a "limited - restricted"
appraisal document as described below.
This is a Restricted Appraisal Report which is intended to comply
with the reporting requirements set forth under Standards Rule 2-
2(c) of the Uniform Standards of Professional Appraisal Practice
for a Restricted Appraisal Report. As such, it presents little
or no discussions of the data, reasoning, and analyses that were
used in the appraisal process to develop the appraiser's opinion
of value. Supporting documentation concerning the data,
reasoning, and analyses is retained in the appraiser's file. The
depth of discussion contained in this report is specific to the
needs of the client and for the intended use stated below. The
appraiser is not responsible for unauthorized use of this report.
Furthermore, in accordance with prior agreement between the
Client and the appraiser, this report is the result of a limited
appraisal process in that certain allowable departures from
specific guidelines of the Uniform Standards of Professional
Appraisal Practice were involved. The intended user of this
report is warned that the reliability of the value conclusion
provided may be impacted to the degree there is departure from
specific guidelines of USPAP.
Specifically, the Sales Comparison and Cost Approaches were not
employed. Only the Income Approach to valuation was employed in
this appraisal.
<PAGE> 2
The subject of this appraisal consists of nine (9)
neighborhood and community shopping centers located in
Pennsylvania, Maryland, South Carolina, North Carolina, Virginia,
and Tennessee. Since the prior report conducted last year, the
Holiday Shopping Center in Collinsville, Virginia has been sold,
and thus, is not included in this valuation.
Purpose and Function of the Appraisal
The purpose of this appraisal is to estimate the current
Market Value "as is" of the Leased Fee Estate of each individual
property as of December 1, 1996, based on the projected net
operating incomes for the properties. This estimate of value
recognizes binding lease commitments presently in effect with the
properties' various tenants. The market value estimates reflect
the most probable price in terms of financial arrangements
equivalent to cash (i.e., market rate, conventional financing).
The function of this assignment is to provide the Client
with an estimate of market value for internal purposes and to
provide certain information required by retirement account
investors of the Client. This appraisal document should only be
used by the Client in ascertaining the value of the subject
properties as it relates to the Client's portfolio management.
This document is not suitable nor should it be used for mortgage
lending, tax appeal, or litigation purposes. The appraisers'
knowledge of the function of this assignment is not and should
not be construed as bias with regard to the opinion(s) of value
rendered herein.
Per the Client's request and to the best of our knowledge,
this report conforms with the Uniform Standards of Professional
Appraisal Practice of the Appraisal Foundation; and, the Code of
Professional Ethics and Standards of Professional Practice of the
Appraisal Institute.
Definition of Market Value
Market Value is defined as:
"The most probable price which a property should bring in a
competitive and open market under all conditions requisite to a
fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by undue
stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and the passing of title from seller
to buyer under conditions whereby:
<PAGE> 3
1. Buyer and seller are typically motivated.
2. Both parties are well informed or well advised, and acting
in what they consider their own best interests;
3. A reasonable time is allowed for exposure in the open
market;
4. Payment is made in terms of cash in United States dollars
in terms of financial arrangements comparable thereto; and
5. The price represents the normal consideration for the
property sold unaffected by special or creative financing
or sales concessions granted by anyone associated with the
sale.(1)
Definition of Leased Fee Estate
Leased Fee Estate is defined as:
"an ownership interest held by a landlord with the right of use
and occupancy conveyed by lease to others; the rights of lessor
or the leased fee owner and leased fee are specified by contract
terms contained within the lease.(2)
Scope/Extent of the Investigation Process
In completing the appraisal, we have performed the following
investigations and analyses. The valuation of the properties
were limited to an income capitalization approach to value, as
this is the most appropriate method of valuation for shopping
center properties. The investigation and analyses performed are
summarized below.
The Client has provided income and expense operating histories
and current rent rolls for each property. Operating histories
were provided for the period from 1989 to 1995. In addition,
the current year's operating histories were provided for
<PAGE> 4
January through September and budgeted amounts for the remainder
of the year. Rent rolls for each property were provided, dated
September 1, 1996. In addition, the Client provided an estimate
of Capital Expenditures projected for each property during the
first year of the analysis.
The following data has not been provided: architectural plans and
specifications, environmental/soil/structural building studies,
plats, and surveys. Furthermore, the subject properties have not
been personally inspected. The appraisers have relied upon
representations of the Client regarding the condition of each
property. The appraiser reserves the right to modify its value
conclusions if the condition of the properties is different from
that represented by the Client
For each property, we analyzed the rent roll in order to make
projections for gross revenues and vacancy. The income and
expenses were estimated based on an evaluation of the operating
histories for each property. As each of these centers has an
operating history and recent leasing activity, there was adequate
information available for each property to make assumptions
regarding the projected income streams. We also compared the
income and expense projections with regional averages provided in
the Urban Land Institute's "Dollars and Cents of Shopping
Centers" (1995 edition). Furthermore, brokers and other
appraisers were contacted regarding current conditions in the
subject markets and appropriate capitalization yield rates.
The appraisal process for each of the properties involved the
following:
Analysis of the operating history and rent roll for a
determination of current rent levels, existing vacancy, potential
future vacancy, and future operating expenses.
Prospective cash flows were developed to estimate the first-year
net operating income as well as a net present value summary of
the discounted cash flow (DCF) analysis. The ARGUS analysis
software was employed in this analysis.
Estimate appropriate capitalization rates and yield rates for
each property. Discussions were held with appraisers and/or
brokers in the respective markets of the subject properties to
ascertain appropriate capitalization rates and discount rates.
Furthermore, discussions were held with these individuals to
discuss the subjects' respective positioning within the market,
and market rents.
<PAGE> 5
Estimate the market value of each property utilizing the direct
capitalization and discounted cash flow (DCF) methodologies.
<PAGE> 6
Valuation Methodology
The sole approach employed in the valuation of the subject
properties is the Income Approach. In this approach, the
property's potential net operating income stream is estimated and
capitalized into a value estimate. The estimate of stabilized
net income is based upon projections of the subjects' historical
income and expense. An estimate of market value is than obtained
by taking the income as projected, and applying a capitalization
rate. This method is referred to as Direct Capitalization.
Another method of valuation within this approach forecasts
the potential gross income, vacancy, expenses, and the resulting
net income over a typical holding/analysis period. The property
is assumed to be sold at the end of the term and the net proceeds
from the sale (reversion) are combined with the last year's net
income to become part of that year's cash flow. In this case,
cash flow is net income available before paying debt service.
The cash flows are converted to a present value using a market
derived that is developed for the holding period is commonly
referred to as the Discounted Cash Flow model, or DCF. We have
used the computer program ARGUS to develop the Discounted Cash
Flow.
The income approach is utilized by many institutional
investors when considering the purchase of an income-producing
property. The selection of appropriate capitalization and yield
rates are based on the subject properties' income generating
characteristics, and market derived investment criteria for
similar properties.
Income and Expense Analysis
The estimates of income and associated expenses are based
upon current negotiated lease terms and conditions at the
subject. As each of these centers has an operating history and
recent leasing activity, there was adequate information available
within each subject property to make assumptions regarding the
projected income streams. In addition, we also compared the
income and expense projections with regional averages provided in
the Urban Land Institute's Dollars and Cents of Shopping Centers.
Effective Gross Income
Effective gross income is the sum of potential gross revenue
less vacancy. Potential gross revenue is the total income
attributable to a property at 100% occupancy. In
<PAGE> 7
addition, potential gross income includes the income derived from
the reimbursement of expenses by tenants as specified in the
leases. The subject properties are anticipated to generate
income primarily from contract rent, and expense pass-throughs.
Rental Revenue: The rental revenue is the stated contract rent
for the contract tenants and the estimated market rent for the
vacant space. Additional income from percentage rent and
miscellaneous income was employed consistent with each
properties operating history.
Reimbursement Revenue: The recoveries represent the tenant
reimbursements for operating expenses that are passed through to
the tenants. These reimbursements are based on the individual
lease agreements for each tenant within each of the shopping
centers.
General Vacancy: An allowance for reductions in potential income
attributable to vacancies, tenant turnover, and non-payment of
rent. This item depends upon current vacancy at each center, the
properties' occupancy history, and expectation for the future.
Operating Expenses
Reimbursable expenses are those expenses which are
reimbursed by the tenants on a pro-rata basis and generally
include real estate taxes, insurance, common area utilities, and
repairs and maintenance of the common area. Non-reimbursable
expenses are those expenses which are not reimbursed by the
tenants and generally include professional fees, promotion and
advertising, and miscellaneous administrative expenses.
Management may be treated as a reimbursable or non-reimbursable
expense. The determination of whether an expense is reimbursable
is based on the lease terms of the individual leases.
Real Estate Taxes were based on actual real estate taxes for the
current fiscal year.
Insurance: These expenses were projected based upon an increase
of 3% over the expense for the prior year.
CAM/Utilities: This expense category includes such items as the
maintenance and repair of the subject's exterior improvements,
elevations/facade, parking lot and pedestrian walkway areas,
grounds/landscaping, snow and trash removal, general repairs,
maintenance, and cleaning and utility usage in the common areas.
In
<PAGE> 8
addition, this expense includes utility usage in the tenants'
spaces if they are not individually metered and billed by the
respective utility companies. We have projected this expense to
be 3% higher than the prior year's expense, or in the cases where
this expense has fluctuated significantly over the last three
years, we have averaged the expense history.
Management: A management fee of 6.0% was deducted from the
income stream as the management expense. This amount is based on
the amount currently charged by management to manage the subject
properties. Typical management agreements are based on a range
of 4.0% to 6.0% of the effective gross income.
Miscellaneous: This category includes legal, accounting,
professional fees, promotional expenses, and miscellaneous sundry
expenditures. The miscellaneous expense was projected based upon
an average of the prior year's expenses for this category. In
estimating the averages, we have excluded those years where the
amounts represented an aberration from the normal, and thus
averaged the prior years totals.
Discount Cash Flow Analysis
The following assumptions have been used in projecting the
cash flows and determining the values of the individual
properties.
The DCF analysis is based on an all-cash purchase, a ten-year
holding period and resale with no seller financing.
Market rent and expenses are projected to increase throughout the
analysis at a rate of 3.0%. This is consistent with parameters
of investors as identified in the "Korpacz Real Estate Investor
Survey", our expectation of C.P.I. growth and consistent with the
lease escalation provisions of many of the subject leases.
During the lease terms, base rent will increase based upon
negotiated contractual lease terms.
Tenant Fit-Up is typically the responsibility of the tenant.
Upon lease rollover, we have allocated a rate of $2.00 per square
foot. A 50% to 65% renewal rate was assumed for existing
tenants.
A cost of sale at the end of the analysis period is estimated to
be 4.0% and is deducted from the capitalized value at the end of
the 10 year holding period. These
<PAGE> 9
costs include broker's commission and seller's share of the
closing and recording costs.
Capitalization rates used range from 10.5% to 12.0%. The
applicable rate for each property is dependent on age, condition,
tenancy, location, vacancy, upcoming lease expirations, and
general investor expectations for the individual markets. We
have also relied upon the Client's representation as to the
market appeal of each property, and conducted interviews with
appraisers and/or brokers active in the properties respective
markets.
Discount rates used ranged from 12.0% to 13.5% and are applicable
to each property based on the conditions as reported above.
A reversionary (terminal) capitalization rate was applied to the
11th year's net operating income. The terminal capitalization
rate was based on a 0.25% to 1.0% increase over the going-in
capitalization rate, depending on the age of the property and
economic prospects for the marketplace. This increase in
capitalization rates from the going-in rate also accounts for
capital improvements that may be required at the time of future
re-sale as the property will have aged 10 years. It also
considers the subject's market appeal at the end of the holding
period.
Valuation
The market value conclusions for the nine (9) shopping center
properties are provided on the following pages.
<PAGE> 10
SUBJECT PROPERTY
Shopping Center: Berkeley Square Shopping Center
Location: Goose Creek (Charleston), South Carolina
Size: 98,258 square feet
Current Vacancy
Leasable: 10,234 square feet (10.4%)
Non-Leasable: 0
Total Vacancy: 10,234 square feet (10.4%)
Capitalization Rate: 12.0%
Value - Direct Capitalization: $2,920,000
Discount (Yield) Rate: 13.5%
Value - Discounted Cash Flow: $3,070,000
Reconciled Value: $3,000,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $3,000,000
Comments: The property was developed in the late 1960's. The
center is situated in an L shape, and is located at the
intersection of U.S. Highway 52 and Thomason Boulevard in the
Goose Creek area north of Charleston, South Carolina. The center
consists of a non-anchored neighborhood center with one pad site.
Local real estate professionals report that the closing of the
naval base has had a measurable effect on the local market,
although, not nearly as severe as most people had anticipated.
The area still has many non-military industrial employers such as
Miles, WestVaco, and Dupont in the northern region of Charleston.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 11
SUBJECT PROPERTY
Shopping Center: Cloister Shopping Center
Location: Ephrata, Pennsylvania
Size: 56,015 square feet
Current Vacancy
Leasable: 2,200 square feet (3.9%)
Non-Leasable: 3,262 (5.8%)
Total Vacancy: 5,462 square feet (9.8%)
Capitalization Rate: 11.5%
Value - Direct Capitalization: $2,730,000
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $2,600,000
Reconciled Value: $2,700,000
Less: 1st Year Capital Improvement: $ 150,000
Value Conclusion: $2,550,000
Comments: This neighborhood shopping center is located in the
town of Ephrata, north of Lancaster, Pennsylvania. This property
consists of an unanchored neighborhood center that is reported to
be approximately 35 years old. The property is located at the
corner of North Reading Road (Route 272) and Martin Avenue.
There is a McDonald's pad site located at the frontage of the
property; however, the rental income is not part of the subject
income stream.
First Washington Management reports that the property requires
repair and replacement of the parking lot, roof, and facade and
other items of deferred maintenance, at an estimated cost of
$150,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 12
SUBJECT PROPERTY
Shopping Center: Edgewood Plaza Shopping Center
Location: Edgewood, Harford County, Maryland
Size: 49,612 square feet
Current Vacancy
Leasable: 0 square feet (0.0%)
Non-Leasable: 0
Total Vacancy: 0 square feet (0.0%)
Capitalization Rate: 10.5%
Value - Direct Capitalization: $2,100,000
Discount (Yield) Rate: 12.5%
Value - Discounted Cash Flow: $2,120,000
Reconciled Value: $2,100,000
Less: 1st Year Capital Improvement: 0
Plus: Value of Excess Ground $50,000
Value Conclusion: $2,150,000
Comments: This property was constructed in 1973 and renovated in
late 1995 and early 1996. The property is located on the corner
of Edgewood Road and Hanson Road, approximately three miles east
of U.S. Route 40, the primary retailing corridor in the
neighborhood.
The neighborhood center is anchored by Santoni's grocery store.
The space formerly occupied by 1st National Bank has been
released to Provident National Bank. The pad site, formerly
occupied by Texaco, was sold during 1996 and has been excluded
from the valuation.
Rite Aid has constructed a free standing retail building on
Edgewood Road opposite the subject property. Since opening the
new facility, Rite-Aid has gone dark in the subject property.
According to management Rite-Aid will continue to pay rent until
the end of the lease term.
The subject includes approximately 114,341 square feet of vacant
ground located along the Hanson Road frontage. This portion of
the property was reported to have received approvals for 12,000
square feet of shopping center development. As such, this
portion of
<PAGE> 13
the property represents additional ground. In valuing the
additional ground, we have examined sales of vacant ground in the
area and neighborhood. The most relevant sale is the sale of
land to Rite-Aid opposite the subject property for $2.20 per
square foot. The property has frontage on Edgewood Road, with
level topography, and was ready for development. The property
purchased by Rite-Aid is deemed to be superior to the subject s
excess land. The subject s excess land does not have frontage on
Edgewood Road, is not level (slopes upward away from Hanson
Road), and would require resubdivision. In addition, it was
reported that the subject sold 35,959 square feet of land to its
neighbor, the U.S. Post Office in December 1996. The price was
$28,500 or $0.79 per square foot. It was deemed that a premium
was paid for this property by the U.S. Post Office so that it
could settle a dispute with an adjacent neighbor. As such, the
excess ground has been valued at $50,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 14
SUBJECT PROPERTY
Shopping Center: Highlandtown Shopping Center
Location: Baltimore, Maryland
Size: 56,109 square feet
Current Vacancy
Leasable: 0 square feet (0%)
Non-Leasable: 0
Total Vacancy: 0 square feet (0%)
Capitalization Rate: 11.0%
Value - Direct Capitalization: $4,580,000
Discount (Yield) Rate: 12.5%
Value - Discounted Cash Flow: $4,560,000
Reconciled Value: $4,600,000
Less: 1st Year Capital Improvement: $ 50,000
Value Conclusion: $4,550,000
Comments: This is a neighborhood shopping center located in
downtown Baltimore, Maryland. The neighborhood is located
approximately three miles from the Central Business District in
an area that is characterized by freestanding retail along
Eastern Avenue. This property was constructed in 1987 and is
anchored by Santoni's grocery store and Rite Aid.
Safeway has constructed a store roughly 1.5 miles from the
subject property which has cannibalized some of the sales from
Santoni's.
First Washington Management reports that the property requires
repair and replacement of the parking lot, and other items of
deferred maintenance, at an estimated cost of $50,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 15
SUBJECT PROPERTY
Shopping Center: Jackson Heights Plaza
Location: Murfreesboro, Tennessee
Size: 156,278 square feet
Current Vacancy
Leasable: 0 square feet (0.0%)
Non-Leasable: 246 (0.2%)
Total Vacancy: 246 square feet (0.2%)
Capitalization Rate: 11.0%
Value - Direct Capitalization: $5,160,000
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $4,960,000
Reconciled Value: $5,050,000
Less: 1st Year Capital Improvement: $ 250,000
Value Conclusion: $4,800,000
Comments: This community shopping center is located in
Murfreesboro, Tennessee. Murfreesboro is approximately 30 miles
southeast of Nashville. The property was constructed in 1959 and
is unanchored. There are pad sites that are leased by Goodyear,
Toot's, and First Union. The subject was the first center to be
built in Murfreesboro and is still located in the core shopping
area of Murfreesboro with an excellent location on Broad Street.
It was reported that a small piece of the subject land was sold
to Boston Market, to join with its existing land holdings. The
sale of the land has no impact on the property or its valuation.
First Washington Management reports that the property requires
repair and replacement of the parking lot, roof, and facade and
other items of deferred maintenance, at an estimated cost of
$250,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 16
SUBJECT PROPERTY
Shopping Center: Lynnwood Place
Location: Jackson, Tennessee
Size: 96,666 square feet
Current Vacancy
Leasable: 1,600 square feet (1.7%)
Non-Leasable: 620 (0.6%)
Total Vacancy: 2,220 square feet (2.3%)
Capitalization Rate: 10.75%
Value - Direct Capitalization: $6,400,000
Discount (Yield) Rate: 12.5%
Value - Discounted Cash Flow: $6,520,000
Reconciled Value: $6,450,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $6,450,000
Comments: This is a neighborhood shopping center built in 1986
and is anchored by Kroger. The property is located in the town
of Jackson, Tennessee, which is situated approximately 50 miles
northeast of Memphis.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 17
SUBJECT PROPERTY
Shopping Center: Quality Center
Location: Lancaster, Maryland
Size: 62,378 square feet
Current Vacancy
Leasable: 7,165 square feet (11.5%)
Non-Leasable: 5,885 (9.4%)
Total Vacancy: 13,050 square feet (20.9%)
Capitalization Rate: 11.5%
Value - Direct Capitalization: $4,140,000
Discount (Yield) Rate: 13.5%
Value - Discounted Cash Flow: $4,220,000
Reconciled Value: $4,150,000
Less: 1st Year Capital Improvement: $ 200,000
Value Conclusion: $3,950,000
Comments: This is a small outlet center that was constructed in
1987. The center is located on the outskirts of Lancaster,
Pennsylvania at the intersection of U.S. Route 30, and
Pennsylvania Route 896. The immediate neighborhood is dominated
by outlet centers. The center is unanchored and includes a pad
site leased to Dairy Queen. The subject s recent past has been
turbulent as many of the center s stronger tenants have relocated
across the street in a competing center that is better anchored
and positioned.
The analysis assumes that Mikassa will vacate its space in July,
1997. The space containing 11,120 square feet, and the space
currently occupied by Totes containing 2,767 square feet will be
leased to Factory Card Outlet at a rate of $11.00 per square foot
beginning August 1997. In addition, Villeroy and Boch has
vacated its space.
First Washington Mortgage has projected a cost of $200,000 for
tenant improvements and leasing commissions to implement the
lease to Factory Card Outlet.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 18
SUBJECT PROPERTY
Shopping Center: Tarrytown Mall
Location: Rocky Mount, North Carolina
Size: 327,819 square feet
Current Vacancy
Leasable: 107,749 square feet (33.6%)
Non-Leasable: 15,543 (4.8%)
Total Vacancy: 123,292 square feet (38.4%)
Capitalization Rate: 11.0%
Value - Direct Capitalization: $4,420,000
Discounted Cash Flow
Discount (Yield) Rate: 13.0%
Value - Discounted Cash Flow: $4,640,000
Reconciled Value: $4,500,000
Less: 1st Year Capital Improvement: $ 0
Value Conclusion: $4,500,000
Comments: This is a large community center/mall constructed in
1964 and remodeled in 1989. The center includes five kiosks and
three pad sites. The pad occupied by Tarrytown Automotive was
reportedly sold in August 1996 for development of a fast food
restaurant. The center is anchored by Montgomery Ward (74,069
square feet), Goody's Family Clothing (24,000 square feet), and
K&W (12,240 square feet). The other anchor, Wholesale Depot,
declared bankruptcy and vacated 79,066 square feet in 1994. The
space has remained unleased, with little immediate prospect of
releasing.
During conversations with brokers and First Washington
Management, is has been reported that there are two big box
buildings in the subject s immediate neighborhood which are
presently vacant. These spaces are 62,400 square feet for the
old K-Mart store, and 90,000 square feet of retail/warehouse
space that was formerly occupied by Sun mart Foods. Both of
these spaces have been vacant since 1994.
It has been reported that Goody s will be vacating their space at
the end of their lease term (February 1998). They are reportedly
relocating to the Golden East Mall. There are not prospects for
releasing this space at the present time.
<PAGE> 19
In valuing the subject property, we have assumed that the vacant
anchor bay containing 79,066 square feet will be released in 24
months, at a rate of $1.50 per square foot, net of any
leasing/tenant improvement costs.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 20
SUBJECT PROPERTY
Shopping Center: Woodlawn Village Shopping Center
Location: Fredericksburg, Virginia
Size: 49,800 square feet
Current Vacancy
Leasable: 0 square feet (0%)
Non-Leasable: 0 (0%)
Total Vacancy: 0 square feet (0%)
Capitalization Rate: 10.5%
Value - Direct Capitalization: $2,420,000
Discount (Yield) Rate: 12.0%
Value - Discounted Cash Flow: $2,330,000
Reconciled Value: $2,400,000
Less: 1st Year Capital Improvement: $ 25,000
Value Conclusion: $2,375,000
Comments: This is a neighborhood shopping center located in
Fredericksburg, Virginia along Route 607 at Cleremont Drive. The
property is located northeast of the downtown area. The center
is anchored by Food Lion and Revco.
The Food Lion s expansion is projected to be complete in
February, 1997. The area to be occupied by Food Lion will total
32,744 square feet.
First Washington Management reports that the property requires
repair and replacement of the parking lot, curbs/sidewalks, and
other items of deferred maintenance, at an estimated cost of
$25,000.
NOTE: An operating history schedule is provided for this
property. The schedule includes a six year comparison (1990-
1995) of income less vacancies and abatements, expenses (real
estate taxes, insurance, common area maintenance, miscellaneous
and management fees), and net operating income. In addition, an
owner's projected for 1996 and appraiser's first year projection
of the income and expense amounts are provided. The source of
the schedule was First Washington Management, Inc.
<PAGE> 21
Capitalization Rate and Yield Rate Discussion
The capitalization of an income stream by direct
capitalization is a method used to convert a single year s
estimate of income into a market value indication.
Alternatively, yield capitalization is often used to convert
future benefits to present value by applying an appropriate yield
rate. Both methods are consistent with the premises on which
income producing properties are purchased. The typical investor
is purchasing future benefits which are anticipated from the
income stream that a property is capable of producing over the
holding period. Inherent in the capitalization and yield rates
are the factors for the return on and of capital, and for the
risk attributed to the uncertainty of realizing projected future
benefits. Essentially, the rates consider the quality, quantity,
and durability of the income stream which the property is capable
of producing. There are several factors which must be considered
in determining an appropriate rates for any given property.
These factors include the following:
- Location
- Physical characteristics of the property
- Stability of leasing
- Strength and credibility of tenancy
- Market conditions
The rates selected for each property were based on the
characteristics specific to each property, and the perceived risk
of receiving the projected net income. In order to assess the
risk associated with the properties individual locational
characteristics, we contacted appraisers and/or real estate
brokers active in each of the respective markets and had
discussions with First Washington Management and Legg Mason.
This information provided us with some understanding of the state
of each of the markets, and the subjects relative position
within the markets. Where available, information was obtained
regarding sales of comparable centers that were used to develop
appropriate rates. Information regarding the subject properties
income stream patterns, vacancy and turnover was obtained by
examining the subjects occupancy and operating histories.
<PAGE> 22
In the evaluation of each of the centers, rates were
selected based on the perceived risk associate with receiving the
projected net income. Investment criteria provided by the
"Korpacz Real Estate Investor Survey", for the Fourth Quarter
1996, is shown below.
NATIONAL RETAIL MARKET INDICES
KEY INDICATORS CURRENT QUARTER LAST YEAR
Free and Clear Equity Returns (IRR or Yield Rates)
Range 10.00% - 14.00% 10.00% - 14.00%
Average 11.63% 11.72%
Overall Capitalization Rate
Range 8.25% - 13.0% 8.25% - 12.50%
Average 9.78% 9.74%
Residual Capitalization Rate
Range 8.25% - 12.0% 8.25% - 13.5%
Average 9.87% 9.98%
In addition, we have consulted the "Investment Bulletin" of
the American Council of Life Insurance Companies, dated September
9, 1996. According to Table 8 of this publication, the average
capitalization rate for investment class retail centers (based
upon a sample of 94 transactions) was 9.0%. These transactions
took place in the Second Quarter 1996, the most recent period for
which information is available from this source.
In choosing the appropriate capitalization rates and yield
rates for the subject properties, we have reviewed the locational
and income characteristics of each property, and selected rates
that take into account the existing tenancy, condition of the
property, and current investor trends. The selected rates are
felt to be reflective of present investor requirements and
current financial market conditions. We have factored in the
variables of risk to include location, anticipated rent levels,
existing tenancy and mix, structure of the leases, i.e., terms,
age and condition of the improvements, the investment
alternatives, and the class of real estate in which the subject
falls.
<PAGE> 23
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - December 1, 1996
Name Berkeley Square Cloister Edgewood Plaza
Location Goose Creek, SC Ephrata, PA Edgewood, MD
<S> <C> <C> <C>
Size 98,258 56,015 47,112
Vacancy
Leasable (Sq.Ft.) 10,234 2,200 0
% 10.4% 3.9% 0.0%
Non-Leasable 0 3,262 0
% 0.0% 5.8% 0.0%
Total Vacancy 10,234 5,462 0
% 10.4% 9.8% 0.0%
Projected Income
Effective Gross Income $499,289 $545,313 $343,631
Expenses 148,669 231,739 123,010
Net Operating Income $350,620 $313,574 $220,621
Capitalization Rate 12.0% 11.5% 10.5%
Value by Direct
Capitalization $2,920,000 $2,730,000 $2,100,000
Discount Rate 13.5% 13.0% 12.5%
Value by Disc Cash Flow $3,070,000 $2,600,000 $2,120,000
Reconciled Value $3,000,000 $2,700,000 $2,100,000
Plus:Value of Excess
Ground 50,000
Less:Capital
Improvements 0 150,000 0
Value Conclusion $3,000,000 $2,550,000 $2,150,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - December 1, 1996 (Continued)
Jackson Lynnwood
Name Highlandtown Heights Place
Location Baltimore,MD Murfreesburo Jackson, TN
TN
<S> <C> <C> <C>
Size 56,109 156,278 96,666
Vacancy
Leasable (Sq.Ft.) 0 0 1,600
% 0.0% 0.0% 1.7%
Non-Leasable 0 246 620
% 0.0% 0.2% 0.6%
Total Vacancy 0 246 2,220
% 0.0% 0.2% 2.3%
Projected Income
Effective Gross Income $824,746 $848,762 $914,074
Expenses 320,534 280,971 226,033
Net Operating Income $504,212 $567,791 $688,041
Capitalization Rate 11.0% 11.0% 10.75%
Value by Direct
Capitalization $4,580,000 $5,160,000 $6,400,000
Discount Rate 12.5% 13.0% 12.5%
Value by Disc Cash Flow $4,560,000 $4,960,000 $6,520,000
Reconciled Value $4,600,000 $5,050,000 $6,450,000
Plus:Value of Excess
Ground
Less:Capital
Improvements 50,000 250,000 0
Value Conclusion $4,550,000 $4,800,000 $6,450,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - December 1, 1996 (Continued)
Tarrytown Woodlawn
Name Quality Center Mall Village
Location Lancaster,PA Rocky Mount, Fredericksburg,
NC VA
<S> <C> <C> <C>
Size 62,378 321,094 49,800
Vacancy
Leasable (Sq.Ft.) 7,165 107,749 0
% 11.5% 33.6% 0.0%
Non-Leasable 5,885 15,543 0
% 9.4% 4.8% 0.0%
Total Vacancy 13,050 123,292 0
% 20.9% 38.4% 0.0%
Projected Income
Effective Gross Income $681,832 $1,260,116 $379,128
Expenses 205,583 774,400 125,431
Net Operating Income $476,249 $485,716 $253,697
Capitalization Rate 11.5% 11.0% 10.5%
Value by Direct
Capitalization $4,140,000 $4,420,000 $2,420,000
Discount Rate 13.5% 13.0% 12.0%
Value by Disc Cash Flow $4,220,000 $4,640,000 $2,330,000
Reconciled Value $4,150,000 $4,500,000 $2,400,000
Plus:Value of Excess
Ground
Less:Capital
Improvements 200,000 0 25,000
Value Conclusion $3,950,000 $4,500,000 $2,375,000
</TABLE>
<TABLE>
<CAPTION>
Mid-Atlantic Centers Limited Partnership
Valuation Summary - December 1, 1996 (Continued)
Name Total
<S> <C>
Size 943,710
Vacancy
Leasable (Sq.Ft.)
%
Non-Leasable
%
Total Vacancy
%
Projected Income
Effective Gross Income $6,296,891
Expenses 2,436,370
Net Operating Income $3,860,521
Capitalization Rate
Value by Direct
Capitalization
Discount Rate
Value by Disc Cash Flow
Reconciled Value $34,950,000
Plus:Value of Excess
Ground 50,000
Less:Capital
Improvements 675,000
Value Conclusion $34,325,000
</TABLE>
CONCLUSION
On the facing page is a summary of the conclusions contained
within this report. As noted, the total value of the subject
properties are estimated to be $35,000,000. From this amount we
have deducted the costs of required capital improvements as
reported by First Washington Management. This cost totals
$675,000.
Thus, as a result of our study and by virtue of our
experience, we are of the opinion that the properties described
herein have a collective market value as of December 1, 1996, as
follows:
MARKET VALUE, "AS IS"
THIRTY-FOUR MILLION THREE HUNDRED TWENTY-FIVE THOUSAND DOLLARS
($34,325,000)
The above estimated value is subject to and predicated upon
the general assumptions and limiting conditions set forth earlier
in the report. Neither this appraisal assignment nor the
prospect of future employment has been conditioned upon this
appraisal producing a specific value. Should you have any
questions concerning this appraisal or the value conclusions
developed in this report, please contact this office.
Respectfully submitted,
SAPPERSTEIN & ASSOCIATES
/S/ Dean G. Gutridge
- ----------------------------------
Dean G. Gutridge, Senior Associate
Reviewed and Approved by:
/S/ Gary L. Sapperstein
- ----------------------------------
Gary L. Sapperstein, MAI, SRPA
<PAGE> 24
CERTIFICATION
Except as otherwise noted in this appraisal report, we hereby
certify that:
1. To the best of our knowledge and belief the statements of
fact contained in this report are true and correct.
2. Physical inspections of the properties, that are the subject
of this report, were not made by the appraisers.
3. We have no present or contemplated future interest in the
real estate that is the subject of this appraisal report.
4. We have no personal interest or bias with respect to the
subject matter of this appraisal report or the parties involved.
5. The reported analyses, opinions and conclusions are limited
only by the reported assumptions and limiting conditions, and are
our personal, unbiased professional analyses, opinions, and
conclusions.
6. This appraisal report sets forth all of the special and
limiting conditions (imposed by the terms of the assignment or by
the undersigned) affecting the analyses, opinions and conclusions
contained in this report.
7. The use of this report is subject to the requirements of the
Appraisal Institute relating to review by its duly authorized
representatives.
8. This appraisal report has been made in conformity with and is
subject to the requirements of the Code of Ethics and Standards
of Professional Practice and Conduct of the Appraisal Institute,
the Appraisal Foundation, and the duly authorized legislative
authority for the states of Maryland, Virginia and the District
of Columbia.
9. No one other than the undersigned prepared the analyses,
conclusions and opinions concerning real estate that are set
forth in this appraisal report (unless otherwise specified).
10. The Appraisal Institute conducts a mandatory program of
continuing education for its designated members. MAIs and RM who
meet the minimum standards of this program are awarded periodic
educational certification. Gary Lee Sapperstein has been
certified under this program. Mr. Sapperstein is a
Certified/General Real Estate Appraiser in the Commonwealth of
Virginia, the State of Maryland, and the District of Columbia.
As of the date of this report, Gary Lee Sapperstein, has
completed the requirements under the continuing education program
of the Appraisal Institute.
11. Our compensation is not contingent upon the reporting of a
predetermined value or direction in value that favors the cause
of the client, the amount of the value estimate, the attainment
of a stipulated result, or the occurrence of a subsequent event.
12. We hereby certify that this appraisal was not based upon a
requested minimum valuation, a specific valuation, or the
approval of a loan.
13. The undersigned member(s) has (have) appraised properties
similar to the subject, and is (are) therefore in compliance with
the competency provision of the Uniform Standards of Professional
Appraisal Practice.
/s/ Dean G. Gutridge
Dean G. Gutridge, Senior Associate
/s/ Gary Lee Sapperstein
Gary Lee Sapperstein, MAI-SRPA, President
LIMITING CONDITIONS
1. The appraiser will not be required to give testimony or
appear in court because of having made this appraisal, with
reference to the property in question, unless arrangements have
been previously made.
2. Possession of this report, or a copy thereof, does not carry
with it the right of publication. It may not be used for any
purpose by any person other than the party to whom it is
addressed without the written consent of the appraiser and, in
any event, only with proper qualification and only in its
entirety.
3. The distribution of the total valuation in this report
between land and improvement applies only under the reported
highest and best use of the property. The allocations of value
for land and improvements must not be used in conjunction with
any other appraisal and are invalid if so used.
4. One (or more) of the signatories of this appraisal report is
a Member (or Candidate) of the Appraisal Institute. The Bylaws
and Regulations of the Institute require each Member and
Candidate to control the use and distribution of each appraisal
report signed by such Member or Candidate. Therefore, except as
hereinafter provided, the party for whom this appraisal was
prepared may distribute copies of this appraisal report, in its
entirety, to such third parties as may be selected by the party
for whom this appraisal report was prepared; however, selected
portions of this appraisal report shall not be given to third
parties without the prior written consent of the signatories of
this appraisal report. Further, neither all nor any part of this
appraisal report shall be disseminated to the general public by
use of advertising media, public relations media, news media,
sales media or other media for public communication without prior
written consent of the signatories of this appraisal report.
5. In the event that this appraisal contains a valuation of an
estate in land that is less than the entire fee simple estate, it
is noted that (I) the value reported for such estate relates to a
fractional interest only in the real estate involved; and (ii)
the value of this fractional interest, plus the value of all
other fractional interests, may or may not equal the value of the
entire fee simple estate considered as a whole.
SPECIAL LIMITING CONDITIONS
1. As agreed upon with the client prior to the preparation of
this appraisal, this is a Limited Appraisal because it invokes
the Departure Provision of the Uniform Standards of Professional
Appraisal Practice. As such, information pertinent to the
valuation has not been considered and/or the full valuation
process has not been applied. Depending on the type and degree
of limitations, the reliability of the value conclusion provided
herein may be reduced.
2. This is a Restricted Appraisal Report which is intended to
comply with the reporting requirements set forth under Standard
Rule 2-2(c) of the Uniform Standards of Professional Appraisal
Practice for a Restricted Appraisal Report. As such, it does not
include discussions of the data, reasoning, and analyses that
were used in the appraisal process to develop the appraiser's
opinion of value. Supporting documentation concerning the data,
reasoning and analyses is retained in the appraiser's file. The
information contained in this report is specific to the needs of
the client and for the intended use stated in this report. The
appraiser is not responsible for unauthorized use of this report.
3. The appraiser has relied upon the rent rolls and financial
statements provided by the Client for valuing the subject
properties. An audit of this data was not conducted by the
appraiser or by a disinterested third party to ascertain its
integrity. The appraiser reserves the right to modify its value
conclusions if the data provided is not factually correct.
4. Physical inspections of the properties were not conducted by
the signatories of this report. The Client has provided an
estimate of capital expenses projected for each property in the
first year of the analysis. The appraiser reserves the right to
modify its value conclusions if the condition of the properties
is different from that represented by the Client or capital
expenditures exceed the estimates provided.
5. The appraiser has relied upon certain representations made by
the client with respect to the various centers. The appraiser
reserves the right to modify its value conclusions if the data
provided is not factually correct.
GENERAL ASSUMPTIONS
1. The legal description used in this report is assumed to be
correct.
2. No survey of the property has been made by the appraiser and
no responsibility is assumed in connection with such matters.
Sketches in this report are included only to assist the reader in
visualizing the property.
3. No responsibility is assumed for matters of a legal nature
affecting title to the property nor is an opinion of title
rendered. The title is assumed to be good and merchantable.
4. Information furnished by others is assumed to be true,
correct, and reliable. A reasonable effort has been made to
verify such information; however, no responsibility for its
accuracy is assumed by the appraiser.
5. All mortgages, liens, encumbrances, leases, and servitudes
have been disregarded unless so specified within the report. The
property is appraised as though under responsible ownership and
competent management.
6. It is assumed that there are no hidden or unapparent
conditions of the property, subsoil, or structures which would
render it more or less valuable. No responsibility is assumed
for such conditions or for engineering which may be required to
discover such factors. Further, it is assumed that no toxic or
radioactive materials are located upon or buried within the
subject property. If such materials are found on the properties
under appraisal, the appraisers reserve to the right to modify
the value conclusion found on the appraisal report.
7. It is assumed that there is full compliance with all
applicable federal, state and local environment regulations and
laws of the date of the appraisal unless noncompliance is stated,
defined, and considered in the appraisal report.
8. It is assumed that all applicable zoning and use regulations
and restrictions have been complied with, unless a non-conformity
has been stated, defined, and considered in the appraisal report.
9. It is assumed that all required licenses, consents, or other
legislative or administrative authority from any local, state, or
national governmental or private entity or organization have been
made or can be obtained or renewed for any use on which the value
estimate contained in this report is based.
10. It is assumed that the utilization of the land (and
improvements) is within the boundaries or property lines of the
property described and that there is no encroachment or trespass
unless noted within the report.
11. It is assumed that the property does not contain within its
confines any unmarked burial grounds which would preclude or
hamper the development process.
12. This document should not be used as a basis to determine the
structural adequacy/inadequacy of the property described herein,
but rather for valuation purposes only.
13. It is assumed that the subject structure meets the
applicable building codes for it's respective jurisdiction. We
assume no responsibility/liability for the inclusion/exclusion of
any structural component item which may have an impact on value.
GENERAL ASSUMPTIONS (Continued)
14. It is assumed that the subject property will meet all code
requirements as they relate to proper soil compaction, grading,
and drainage. We further reserve the right to alter value should
a material change in the status of subject be discovered.
15. Building plans, surveys and gross building area calculations
as supplied to the appraisers by the client, are assumed to be
reasonably accurate. In any event, the appraiser assumes no
responsibility or liability for the accuracy of such
information/data provided. In this particular instance, we were
not afforded with building plans, specifications, site plan or
survey of the property. This information was provided to your
appraisers by the lender via a descriptive narrative from an
unknown source, and we have relied upon same.
16. Our investigation makes it reasonable to assume, for
appraisal purposes, that no insulation or other product banned by
the Consumer Products Safety Commission has been introduced into
the appraised premises.
17. Fundamental to the valuation analysis is the assumption that
no change in zoning is either proposed or eminent. Should a
change in zoning status occur from the property's present
classification, the appraisers reserve the right to alter or
amend value accordingly.
18. Unless stated otherwise in this report, the existence of
hazardous materials, which may or may not be present on the
property, was not observed by the appraiser(s). The appraiser
has no knowledge of the existence of such materials on or in the
property. The appraiser is not qualified to detect such
substances. The presence of substances such as asbestos, urea-
formaldehyde foam insulation, or other potentially hazardous
materials, may affect the value of the property. The value
estimate in this appraisal report is predicated on the assumption
that there is no such material on or in the property that would
cause a loss in value. No responsibility is assumed for any such
conditions, or for any expertise or engineering knowledge
required to discover them. If desired, the client is urged to
retain an expert in this field.
19. The Americans with Disabilities Act (ADA) became effective
on January 26, 1992. We have not made a specific compliance
survey and analysis of the property to determine if it is in
conformance with the various detailed requirements of the ADA.
It is possible that a compliance survey of the property along
with a detailed analysis of the requirements of the ADA could
reveal that the property is not in compliance with one or more of
the requirements of the Act. If so, this could have a negative
effect upon the value of the property. Since we do not have
direct evidence relating to this issue, we did not consider
possible non-compliance with the requirements of the ADA in
estimating the value of the property.
The letter of valuation report has a section titled "ARGUS
Schedules". This section consists of the following schedules:
(a) Berkeley Square Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(b) Cloister Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(c) Edgewood Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(d) Highlandtown Village Shopping Center
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(e) Jackson Heights Plaza Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(f) Lynnwood Place Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(g) Quality Center Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(h) Tarrytown Mall Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
(i) Woodlawn Village Shopping Center:
1. Schedule of Prospective Cash Flow In Inflated Dollars for
the Fiscal Year beginning 12/1/1996
2. Prospective Present Value, Cash Flow Before Debt Service
plus Property Resale Discounted Annually (End-point on
Cash Flow & Resale) over a 10-Year Period
3. Supporting Schedule -- Scheduled Base Rental Revenue
NOTE: The schedule of Prospective Cash Flow for each shopping
center presents for 11 years an account by account analysis in
the following categories: potential gross revenue, revenue
adjustments, operating expenses, and leasing and capital costs.
The resulting total is cash flow before debt service and income
tax.
NOTE: The schedule of prospective present value for each
shopping center presents for 10 analysis periods the present
value of cash flow at 10.00%, 10.50%, 11.00%, 11.50%, 12.00%,
12.50%, 13.00%, 13.50%, and 14.00% based on the annual cash flow
amounts reached for years one through ten from the respective
schedule of prospective cash flow. The present value of cash
flow at each rate for years one through ten are totalled and a
total property present value per square foot is presented. A
percentage value distribution table is also presented which
consists of assured income, prospective income, and prospective
property resale.
QUALIFICATIONS
DEAN G. GUTRIDGE
POSITION Senior Associate, Sapperstein & Associates
Bethesda, Maryland - 1991 to Present
CERTIFICATION Certified General Appraiser - Maryland - #4-20093
Certified General Appraiser - Virginia - #4001-003572
EDUCATION B.S., University of Maryland, College Park, MD
Appraisal Institute:
I-A, Basic Principles
I-B, Capitalization Theory and Techniques
II, Urban Properties
VIII, S.F.D. Residential Valuation
Standards of Professional Practice, A & B
Seminars and Professional Instruction:
Office Park Development - Urban Land Institute
Shopping Center Development - Urban Land Institute
Office/Retail Lease Negotiation - Northwest University
Urban Land Use Planning - American University
Housing Markets - American University
PROFESSIONAL
HISTORY Miller Properties, Vice President - Development
1987 to 1991
Westmark Mortgage Corp, Senior Vice President - Operations, 1984
to 1987
Lipman, Frizzell & Mitchell, Appraisal Associate
1983 to 1984
Adolph C. Rohland & Associates, Appraisal Associate
1978 to 1982
APPRAISAL
ASSIGNMENTS Shopping centers, office, industrial/warehouse,
retail, multi-family, special purpose, commercial and residential
land, fair annual rental studies, feasibility studies,
residential dwellings.
ADDITIONAL
INFORMATION Real Estate Broker in the State of Maryland
GARY LEE SAPPERSTEIN, MAI-SRPA
6917 Arlington Road, Suite 300
Bethesda, Maryland 20814
EDUCATION Maryland University - B.S. Degree (Business)
American University - Appraisal I-A, I-B, II, Residential
Valuation, Litigation Valuation and Course 202 - Applied Income
Property Valuation, Standards of Professional Practice
Yearly Seminars Sponsored by AIREA, SREA, MBA and Other
Organizations
MEMBERSHIPS The Appraisal Institute:
MAI - Member Appraisal Institute
SRPA - Senior Real Property Appraiser
1993 - Chapter Board of Directors
Realtor, Washington Board of Realtors
Advisory Board Director, Allegiance Bank N.A.
EMPLOYMENT Sapperstein & Associates, September 1982 to Present
Former, V.P., Associate Appraiser - Philip R. Lamb & Co.,
October 1978 to August 1982
LICENSED Real Estate Broker in State of Maryland
Real Estate Broker in District of Columbia
CERTIFICATION Certified General Real Estate Appraiser in
Maryland (#04-10002), Virginia (#4001-000176), and the District
of Columbia (10042)
QUALIFIED EXPERT
WITNESS Federal Tax Court, Maryland Tax Court, Expert Witness
Consultant - D.C. Board of Appeals
TYPES OF
APPRAISALS Residential dwellings, condominiums, shopping
centers, apartments, assisted living facilities, office
buildings, hotels, commercial, industrial and special purpose
buildings, school sites, parking lots, farms and acreage,
subdivision, golf and country clubs, dam sites and parks, partial
takings for highway and utility right-of-ways, urban renewal
projects, special benefits, fair annual rental studies, re-use
appraisals and feasibility studies.
OTHER SERVICES Professional consultation services and limited
brokerage services are provided, upon request.
APPRAISAL ASSIGNMENTS COMPLETED FOR THE FOLLOWING CLIENTS:
Government Agencies: Federal Government (U.S. Post Office
Department), Montgomery County Government, Prince George's
County, Department of Transportation, Maryland National Park and
Planning Commission, State Highway Administration, Montgomery
County Board of Realtors, City of Rockville, City of College
Park, Government of the District of Columbia, The Housing
Opportunities Commission, Department of Housing and Community
Development, Pennsylvania Avenue Development Corporation
(P.A.D.C.).
Commercial and Industrial Firms: Legg Mason, Reality Advisory
Services Group, Merrill Lynch, The Traveler's Insurance, J.P.
Morgan Financial, Paine Webber, Transamerica Relation Service,
Inc. Cities Service Oil Company, Kodak, GMAC, Equitable
Relocation Service, TRW Systems, C&P Telephone Company, Kenneth
Michaels Company, CNA Insurance Company, Magna Group, Inc.,
Techtronics, Inc., Employee Transfer Corporation, Realty
Investment Corporation, H.B.W. Group, Weaver Brothers, Carey
Winston Company, K.T. Wade Associates, Foulger Pratt Construction
Company, Lloyd Moore Development Company, Marriott Corporation,
C.I. Mitchell & Best, Washington National Realty, GEICO, Gordon
Builders, Aldre, Newlife Group, Potomac Investment Associates,
Abrams & Associates, Anastasi-Stephens Group, Howard Hughes
Medical Institute, The GLM Corporation, The Ward Corporation,
Sigal-Zuckerman, Greenhill Capital Corporation, Landstar
Development Company, Design-Tech, NV Land, Cross Builders,
Goodman Homes, Royco, and Standard Properties among others.
SERVING THE BALTIMORE/WASHINGTON/RICHMOND METROPOLITAN AREA
Phone - (301) 654-0214
Fax - (301) 654-0272
